Research Archives

Constructing Relational Databases to Study Life Histories on Your PC or Mac

In this article, I present a strategy for designing relational databases with the program FileMaker Pro (FileMaker) to study the histories of individuals and organizations. The approach facilitates efficiency in inputting data and flexibility for constructing statistical analyses from the rawdata. The key feature of the strategy is to define the basic unit of observation in the database in terms of an agent, an event, and a date. Given that programs such as FileMaker can easily sort data by agent and date, once one structures the data correctly, he or she can construct well-ordered event histories for agents, even if the researcher enters the data in an unordered fashion. By using events that happened to an agent at a particular time as the basic unit of observation, one maintains maximum flexibility to do statistical analysis that aggregates basic data in different ways. This article illustrates the power of the approach by outlining ways to analyze changes in geographic distances between two events marking the life histories of chemists. Download Article.

Evolutionary Economics Meets Business History at Trinity College in Dublin

I participated in a workshop bringing together Business Historians and Evolutionary Economists at Trinity College in Dublin.  Oveview information on the workshop and the presentation slides have been posted in the Economic-Evolution.net discussion forum. 

Problems with the Peer Review System in Science

Frank Furedi has written a very thoughtful essay on the problems with current peer review system in science. In my view, the issues are a lot more serious in the social sciences where is much harder to formulate non-trivial general laws and make precise predictions that can be proven or disproven. The natural sciences require replication before something is accepted. There is very little exact replication in management research for example. Theories are accepted on very tenous grounds and when you write a paper that contradicts existing paradigms your data is not going to persuade your peers who have a vested interested in the status quo.  Read Furedi’s Essay.

Update 28. June 2010:Interesting Problem Case in Economics:  Copy URL into your browser: http://www.handelsblatt.com/politik/nachrichten/no-comment-please;1446947

Jeffrey Meyers on Writing Habits

CM: Having written 43 books, including more than 20 biographies, you’re nothing if not prolific. What’s your work routine?

JM: I work every day— it’s important to keep up momentum—from 9:30 to 1 in the morning and from 7:30 to 11 in the evening. In the afternoons I recharge by playing tennis (inexpensive psychotherapy), taking long walks, frequenting bookstores, going to the Cal library, and wandering around San Francisco. I do research and interviews with family and friends for six months. I then write by hand on yellow pads, type three pages a day and 100 pages a month on the computer, and finish a 400-page book in four months. Finally, I spend two more months revising.

When I’m done, I follow the example of my longtime friend, Iris Murdoch, who began her next novel the day after completing the previous one. (More momentum.) While the editor is reading my typescript, I do the research and write a ten-page proposal that secures the contract and advance for my next book.

From California Monthly.

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

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. 

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

Automatic Coding of Printed Materials

Traditionally most researchers working with printed data sources have entered data by hand to convert it into electronic format. If a research project involves large amounts of data from similarly formatted sources – for example, when one tries to create a longitudinal database of directory information spanning many years – entering this data by hand is a very labour intensive and tedious task. We wanted to automate the coding of printed directory information in order to cut down the time it takes to transfer this information into electronic data. Once the data is in electronic format, it can be further analysed with a plethora of software packages ranging from Microsoft Excel, FileMaker, SAS and SPSS, depending on the needs of the particular researcher. The purpose of this technical paper is to share with other scholars in a clear and practical way the methods we developed for automating the coding of printed information. Download article.

The Power of Richness IV: How Can Qualitative Methods Help us Ask Better Questions

Over 150 people came to the Power of Richness PDWs at each of the last three Academy meetings, drawing from many different divisions and interest groups.  With the demand for the workshop running so strong, Diana Day and I will try to organize an All-Academy PDW for the next meeting Annaheim. The format this past year proved very successful for learning how to do qualitative research well. The first part of the 2008 PDW will feature again a panel of leading qualitative scholars (Jane Dutton,  Royston Hinnings,  Martha Feldman and Ann Langley ), who will offer their insights qualitative research can help us ask the right questions. The second part of the workshop will have parallel sessions designed for people beginning or developing qualitative research and those trying to publish qualitative research.  Participants in the second part can have small group discussion with panelists, attend at least two of several tutorials, or sign up for a paper feedback session with experience scholars. For more up-to-date information on this Qualitative Research PDW, interested parties should go to our website PDW 2008 where we will post new information as the specifics of the PDW (tutorials subjects and leaders chosen), working paper discussion leaders, etc.

When and Where: Friday, August 8, from 1:00 to 5:00 pm, Anaheim, California

Presentation slides from the event are now posted. Please click on this link.

The Power of a Good Meta-Analysis

Chinese scientists have carried out a powerful meta-analysis and created new knowledge about the chemical pathways that lead to addiction. Can social scientist imitate this model? I am not sure. But certainly we should strive to do so.

Dr Wei therefore ran her 396 genes through a database of all known pathways to see which involved several enzymes encoded by those genes. She found 18 that were involved in addiction to at least one type of drug. Five, however, were common to all four types, and these five pathways therefore look as though they are at the core of the process of addiction. Three of the five were already under suspicion. Dr Wei’s result provided strong statistical evidence to back up what had just been hunches. Two other pathways, however, had not previously been considered as being involved in addiction. The existence of these five central pathways helps explain a lot about addiction. First, it gives weight to the belief that some people are more susceptible to all sorts of addiction than others are. That contrasts with the thought that addictions are substance-by-substance phenomena, though the two ideas are not mutually exclusive since changes in the 13 substance-specific pathways clearly also result in addiction.

Full story is available at Economist.com.

Malcom Gladwell Reviews the Problems with IQ Measurements

This is an excellent piece that shows how important it is to actually understand how IQ measures are constructed. Any empirical researcher can learn from the New Zealander who showed how much the alleged genetic intelligence is socially constructed. Read NONE OF THE ABOVE: What I.Q. doesn’t tell you about race.

Charles Tilly’s Writings on Methodology now on the Web

Charles Tilly is one of the most innovative and productive social scientists alive.  His research know-how should be passed on to the next generation of researchers, not only to those who are fortunate to take his classes at Columbia University.  With the approval of Tilly, Sekou Bermiss and I made electronically available all his writings on methodology. You can search this archive by key word and topics.  Go to: Tilly on Methodology Archive

April 2008: Daniel Little Interviews Charles Tilly on YouTube

The Power of Richness III: Crafting Qualitative Research Papers

The large crowds that came to the Power of Richness PDWs in Atlanta and the year before in Hawaii have convinced us there is significant demand in the Academy for learning how to do qualitative research well. This year we will build on the success of our two previous qualitative methods PDWs and create an even more ambitious PDW. The first part of the PDW will feature a panel of leading qualitative scholars (John Van Mannan, Steve Barley, Andy Hargadon, and Bill McKelvey), who will offer their insights about how to craft qualitative research papers. The second part of the workshop will have parallel sessions designed for people beginning or developing qualitative research and those trying to publish qualitative research. For more up-to-date information on this Qualitative Research PDW, interested parties should go to our website PDW 2007 where we will post new information as the specifics of the PDW (tutorials subjects and leaders chosen), working paper discussion leaders, etc.

WORKSHOP REQUIREMENTS: Participants interested in submitting a working paper for feedback in the working paper discussion groups need to send their papers (more than 10 and less than 35 pages) to (JavaScript must be enabled to view this email address) at by July 13. Each paper should provide several key words on the title page indicating the type of qualitative method, data, and analysis techniques used. Working papers will be accepted for evaluation and feedback in this part of the workshop on a basis of first-come, first-served until we fill all the slots we can make available. ONLY those participating in the working paper sessions need to register through submitting a paper. All other parts of the PDW are open to everyone.

When and Where: Friday, August 3, from 1:00 to 5:00 pm at Marriot Liberty Ballroom C.

Presentation slides from the event are now posted. Please click on this link

Knowledge and the Wealth of Nations: A Story of Economic Discovery

David Warsh tell the story of how the idea of increasing returns that was already present in Adam’s Smith’s Wealth of Nations transformed academic economics in the 1980s. Read Paul Krugam’s review in the New York Times.

Malcom Gladwell Reviews Charles Tilly’s New Book “WHY”

Gladwell writes: In “Why?” (Princeton; $24.95), the Columbia University scholar Charles Tilly sets out to make sense of our reasons for giving reasons. In the tradition of the legendary sociologist Erving Goffman, Tilly seeks to decode the structure of everyday social interaction, and the result is a book that forces readers to reexamine everything from the way they talk to their children to the way they argue about politics. Read the full review in the New Yorker.

The Power of Richness II: Exploring Qualitative Research Methods

Inspired by the large number of participants at the “The Power of Richness: The Why, When, Where and How of Qualitative Research Methods” PDW in Honolulu, Diana Day and I (Peter Murmann) decided to organize a follow-up workshop on qualitative methods at the academy meeting in Atlanta.  The workshop will again have a stellar group of scholars presenting their ideas about how to make qualitative reseach powerful. The confirmed presenters are: Kathy Eisenhardt (Stanford), Mauro Guillen (Wharton-U. of Pennsylvania), Sara Rynes (Editor of AMJ), Nicolaj Siggelkow (Wharton-U. of Pennsylvania), John Wagner (Associate Editor of ASQ), Karl Weick (Michigan). More details about the workshop will as we are getting closer to the event.

When and Where: Friday, August 11, from 1:30 to 4:30 pm at the Atlanta Marriott in International 4

Update March 17,2006: The workshop is being sponsored by virtually all divisions of the Academy: BPS/HR/MED/MOC/MSR/OB/ODC/OMT/ONE/PNP/PTC/SIM/CAR/CM/
ENT/GDO/HCM/IM/MC/ and RM.

Visit the Discussion Forum for the Event where you can now download the presentation slides from the workshop. 

Project on the Competitiveness of Firms in the Global Paper & Pulp Industry, 1805-2005

Together with two Finish scholars, Juha-Anti Lamberg and Jari Ojala, I started a comparative study of the paper and pulp industry. Human beings have been making paper from various raw materials for thousands of years. But in 1804 a Frenchman invented a continous paper machine revolutionized the manufacturing and started the modern paper making industry.

The goal of our project is to study shifts in competitive advantage from one country to the next and from firm to firm during the last 200 years.  We are starting our comparative analysis looking at Britain, Germany, Finland and Sweden. Our long-term plan is to study all the major paper producing countries in the word. If you are interested in participating in this study, contact us.

How Business Schools Lost their Way

Warren Bennis and James O’Toole just published an article in the Harvard Business Review that I wholeheartedly agree with. It is very fun to read because they are well-informed and don’t shy away from stating some unpleasant truths.  Good business schools have room for theoreticians, scientific empiricists, and practice oriented scholars.

The Stanley Reiter Lecture 2005

On January 26, 2005 I delivered the Stanley Reiter Award Lecture. The Reiter award is named for Stanley Reiter, Charles E. and Emma H. Morrison Professor of Managerial Economics and Decision Sciences at Kellogg. It is presented to a Kellogg faculty member whose paper is judged by a panel of Kellogg professors across disciplines to be the best paper written in the preceding four calendar years. I received the award for my book Knowledge and Competitive Advantage: The Coevolution of Firms, Technology and National Institutions. You can also read the text of the lecture by clicking on “More” button or by downloading it as a Word file.  Alternatively,  you can watch a video (58 minutes) of the lecture with Real Player here: Lecture Video. If you watch the video, you should download the Slides that I presented during the lecture but which are not visible in the video.

The Power of Richness: The Why, When, Where and How of Qualitative Research Methods

Participate in the workshop on Qualitative Methods the Academy of Management in Hawaii, Friday afternoon from 1:00 to 4:00, August 5, 2005.  The Panelists are: Robert Burgelman, Diana Day, Deborah Dougherty, Charles Galunic, Johann Peter Murmann, Gabriel Szulanski, and Klaus Weber.

Visit the Discussion Forum for the Event where much additional information will be posted.

Social Mechanisms: An Analytical Approach to Social Theory

I am a big fan of explanations of social phenomena that set forth the precise causal mechanisms that produce them. This book edited by Peter Hedstroem and Richard Swedberg provides a very good introduction to the approach. You can download the overview chapter here:  Social-mechanism.pdf Click on “More…” for a Table of Contents.

Review of Jared Diamond’s New Book “Collapse”

The author of Guns, Germs, and Steel considers why some societies collapse when faced with environmental or political catastrophe, while others soldier on. Malcom Galdwell has published a useful review of the book in the New Yorker .

Personality Plus: Employers love personality tests. But what do they really reveal?

A hefty percentage of American corporations use personality tests as part of the hiring and promotion process. The tests figure in custody battles and in sentencing and parole decisions. “Yet despite their prevalence-and the importance of the matters they are called upon to decide-personality tests have received surprisingly little scrutiny,” Paul writes. We can call in the psychologists. We can give [people] a battery of tests. But will any of it help? Read more of Malcom Gladwell’s revealing New Yorker Article.

The Construction of Social Reality

John Searle’s book is a must-read for every social scientist. Searle makes the important distinction between observer independent facts (the sun exists independently of any human being observing it) and oberserver dependent facts (money does not exist unless people agree that a sheet of paper is worth a particular amount). This distinction, in my view, lies at the core of what makes natural sciences different from the social sciences.

Adaptation vs. Selection in Industry Change: Toward a Contingency View

Important Workshop at AOM ‘04: Participate in the workshop on Adaptation vs. Selection in Industry Change organized by Jan Rivkin and myself. Panelists are: Bill Barnett, Clayton Christensen, Anita McGahan and Will Mitchell.

Details on the Workshop

Economist Paul Romer on Innovation, Instutitions and Economics growth

Paul Romer gave an interesting interview in Reason Magazine describing in non-technical terms on how ecnomic growth comes about.

Evolutionary Economics—The State of the Science

This is a talk I gave at a conference New Perspectives on Telecommunications and Pharmaceuticals in Europe and the United States: Conference on Evolutionary Economics:
Conference Program

Teaching Archives

New Management Focus: Invest in Relationships!

Designing an organization requires making a million decisions both large (e.g. picking a strategy) and small (e.g. picking out paper for the PC printer). It is easy to get lost in the trivial instead of focusing on getting the critical elements right. In my courses, I try to present ideas and frameworks that help identify what is important. At the recent Academy of Management Conference in Montreal I came across a phrase that was new to me. In my view,  it crystallizes what managers need to do to design an organization that is able to respond to all the unexpected events that invariably occur in the life of an organization:

You Don’t Have to Pay Employees More Than the Competition to Keep Them Happy

Returning to Chicago for the first time in three years, I went to two of my favorite restaurants. In one, Lulu’s, most of waitresses and busboys I had seen three years ago were still there. In the other, I recognized no one except for the owner. So I asked the owner of Lulu’s if he was paying his people more.  He said: “No.” I asked him a second time. He still said:  “No.” Confirming the lesson that many management professors emphasize in the context of the Southwest airline example, you don’t have to pay people more than the competition to keep them happy. Lulu’s is a fun place and the interior design is attractive, providing employees non-monetary rewards. Evidently the owner is also not getting on the nerves of his staff.  Jokingly he says in front of one of his female employees: “I cannot even get rid of the people I would like to see go.” The lady—who must have been working there for at least 8 years—interjects: “I knew you were going to say this.” The general lesson (except perhaps for Wall Street before the crash) is: You don’t need to pay people more than the competition. But the total rewards of working for you have to be more than the total rewards of working for someone else. Otherwise people will leave.

The Wrong Stuff Blog

We seem to have a built-in tendency to want to learn from successful people and pay little attention to failures. We also have a hard time admitting mistakes. In fact, what dintinguihses mature and, dare I say, clever,  indivdiuals is precisely that they can admit mistakes and learn from them.  Kathryn Schulz, who is about to publish a book on the subject, has published on Slate a number of great interviews and reflections on being wrong. The one with Alan Dershowitz is particularly interesting. If you want to start with the most recent entry, start here: The Wrong Stuff

CEO Q&A: Greg Bourke

What is your number-one tip for managing people?

Be empathetic: When you understand the issues that constrain staff from doing their job you will usually identify bigger issues in the organization.

Is there a lesson you have never forogotten?

Progress is not perfection.

From BRW, April 29-June 2, 2010, p. 12.

CEO Q&A: Lincoln Crawely

What has been your greatest regret in Business?

That I didn’t really get to know and accept my strengths and weaknesses earlier.

From BRW, April 15-21, 2010, p. 10.

Warren Buffet’s Symbolic Leadership

Watch this great advertisement staffed by employees of Geico. Warren Buffet, whose companey fully owns Geico, participates in the ad to demonstrate that he is one the many co-workers. It is funny to see the 80-year-old billionaire impersonate Axl Rose.

The New AGSM MBA (Executive) Strategic Management Year

Apple did not forsee the success of the application store

It is hard to forsee the future as the recent episode with Apple’s application store demonstrates.  The NY Times reports:

The App Store’s success — as much a surprise to Apple as it has been to competitors — has given rise to a new digital ecosystem. Today, hundreds of software aspirants, from individuals tinkering in their bedrooms late at night to established companies looking for lucrative new revenue streams, are jumping into the App Store fray.

When making a decision, managers often make the mistakes of only considering the potential upsides, but not the cost of downsides. Positive surprises don’t kill firms. It is the negative surprises that bring you down. 

Benefits of the Knwoledge Economy

Figure 1 from the ETH Strategy Report: Knowledge is the main engine of economic growth. A strong correlation can be observed between the Knowledge Economy Index (KEI) and GDP per capita. The KEI is calculated by the World Bank and is based on the four pillars of the Knowledge Economy framework: 1. An economic and institutional regime to provide incentives for the efficient use of existing and new knowledge and the flourishing of entrepreneurship; 2. An
educated and skilled population to create, share, and use knowledge well. Click on More to see a powerful picture.

The Economist on Annoying Bussiness Guru and the Problems with MBA Curricula

The Economist has a wonderful new column called Schumpeter. The October 22 issue revists the shortcomings of management gurus that I highlight in my classes. The Sepember 24 column encourages business schools to teach people to be more sceptical. 

The three habits…of highly irritating management gurus

Business schools have done too little to reform themselves in the light of the credit crunch

Phil Tetlock Critically Reviews Three Books on Forecasting the Future

Telock does us the service of giving a close reading of three books that what to overcome the obstacle that Yogi Berra identified in his qib: “Prediction is very hard, especially about the future.”

The Fat Tail: The Power of Political Knowledge for Strategic Investing by Ian Bremmer and Preston Keat.

The Predictioneer’s Game: Using the Logic of Brazen Self-Interest to See and Shape the Future by Bruce Bueno de Mesquita

The Next 100 Years: A Forecast for the 21st Century by George Friedman

Read Telock’s excellent review at National Interest.

Debate: Do Women Make Better Managers

The jury is still out. But read this interesting exchange on NYTimes.com. Rember that just because on average women may be different than men, this does not mean that it is true for the person in front of you.

Susan Pinker: Whether we’re talking about mentoring, managing or office politics, the research is clear: “Men and women together are the best.”

Sharon Meers: Women often take an alternative approach to leading teams — encouraging more open discussion, cultivating talent and sharing credit. Feedback is the place where women bosses may add the most value.

Three Books on the Origins of the Financial Crisis and its Lessons

John Lanchester reviews three books on the origins of the financial crisis and its lessons in the New Yorker.  Two of them are useful for the general reader.

Gillian Tett, “Fool’s Gold” (Free Press)

Richard A. Posner, “A Failure of Capitalism” (Harvard)

I personally personally found Fools Gold the most rewarding of all the books and a higly recommend it to anyone who works in the finance industy or simply wants to understand what caused the recent financial crisis.

Read full review here.

CEO Q&A: Bernie Brooks

Chief executive, Meyer (Australia)

What is your number-one tip for managing people?

You never get in trouble for over-communicating with them.

What is your number-one tip for managing a business?

Give the team more responsibility than they expect and measure everything in the business that can be measured.

A lesson you have never forgotten?

How the mighty have fallen. Some six of the top 10 retailers in 1987 don’t exist today and that is a sign that you can never be complacent in retailing.

Excerpted from BRW, Vol. 31, No. 12, FYI.

GE’ s Jeff Immelt refuses bonus for 2008

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.

Short History of Modern Finance

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.

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.

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

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. 

What Don Quixote Can Teach Managers and Entrepreneurs

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.

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.

Irrational fear: No good at risk

The Economists reviews of “Risk: The Science and Politics of Fear” by Dan Gardner
THE official death toll from the September 11th terrorist attacks in 2001 was 2,974. But in 2002 America’s death toll on the roads grew by more than 1,500—casualties of the terrorism-inspired exodus from safe aeroplanes to dangerous motor cars. A swan washes up on a British shore, dead from bird flu, and the press panics, while the 3,000 people who die every year on the country’s roads (13 times the number of people who have ever died from bird flu) go largely unremarked. Human beings are notoriously bad at dealing with risk. Two new books explore why, and investigate the effects that misunderstanding risks can have on public policy. The first, an excellent work by a Canadian writer, Dan Gardner, is a broad meditation on the nature of risk, beginning with a psychological explanation for why people find it so difficult to cope. Mr Gardner analyses everything from the media’s predilection for irrational scare stories to the cynical use of fear by politicians pushing a particular agenda.

Introducing the Meeting Meter™

What CEOs are Reading

The common perception is that CEOs are reading the latest popular management books to help them with their difficult job. An article in the New York Times suggests otherwise. I am not sure if the CEOs that Harriet Rubin portrays in here article are representative of all CEOs and I think the title of the article “C.E.O. Libraries Reveal Keys to Success” is an overstatement, but any manager should read what she has to say. 

Harriet Rubin: Michael Moritz, the venture capitalist who built a personal $1.5 billion fortune discovering the likes of Google, YouTube, Yahoo and PayPal, and taking them public, may seem preternaturally in tune with new media. But it is the imprint of old media — books by the thousands sprawling through his Bay Area house — that occupies his mind. “My wife calls me the Imelda Marcos of books,” Mr. Moritz said in an interview. “As soon as a book enters our home it is guaranteed a permanent place in our lives. Because I have never been able to part with even one, they have gradually accumulated like sediment.” Serious leaders who are serious readers build personal libraries dedicated to how to think, not how to compete. Ken Lopez, a bookseller in Hadley, Mass., says it is impossible to put together a serious library on almost any subject for less than several hundred thousand dollars. Perhaps that is why — more than their sex lives or bank accounts — chief executives keep their libraries private.

New School of Strategy & Entrepreneurship launched in Sydney

The Global Climate Crisis

The website for An Inconvenient Truth provides the basics facts about the science of climate change.  Watch the trailer for film.

Give the DVD to your friends this holiday season.

Commissioned by the British government, the economist Stern published on October 30th his study evaluating the economic consequences of global warming. He writes: “The scientific evidence is now overwhelming: climate change presents very serious global risks, and it demands an urgent global response (p. i) ...There is still time to avoid the worst impacts of climate change if strong collective action starts now.” (p. xxvii) You can download a summary of his review here. If you don’t have time to read the 27 page summary of the 600 page report, here is a short review of its conclusions in the New Yorker.

Reflections On “The Long Tail” - Give me Good Data!

A few days ago, I came across a very positive review of The Long Tail, a new book by Wired Maganize writer Chris Anderson. The book’s main thesis is that “the future of commerce and culture isn’t in hits, the high-volume head of a traditional demand curve, but in what used to be regarded as misses - the endlessly long tail of that same curve.” The books purports to show that the 80/20 rule (most sales derive from a few products) does not apply any more with internet retailing because internet retaling can stock many more items. This morning Lee Gomez in his Wall Street Journal column trashed Anderson’s analysis, claiming that Anderson’s data was flawed. (You can read the Gomez colum “Long Tail’ May Not Wag the Web Just Yet”  on WSJ.com or through your library’s article database.) Anderson in turn claims that Gomez did not get the data right and wrote a facinating rebutall on his website. What this exchange underlines is that getting good data and working meticulously to draw the correct conclusion often is worth a “fortune” for managers. More broadly, before you adopt a new fashionable business idea, ask yourself what data supports that the idea in fact is going to work. With more data you might have realized that the idea hurts as often as it helps.

The Essential Drucker: The Best of Sixty Years of Peter Drucker’s Essential Writings on Management

Even the Best Cannot Predict the Future

It is very useful to recognize that the social world is too complex to predict well what will succeed and what will fail. Those who think they know with great certainty what will succeed run the danger of overinvesting in their pet scenarios. What is the lesson? Just like with stocks, we should always have a portfolio of beliefs about the future, reducing the risk of getting stuck with the wrong scenarios.

Who Says Elephants Can’t Dance: Inside IBM’s Historic Turnaround

In the early 1990s, IBM was in danger of going bankrupt. Loius Gerstner was called in to turn the company around.  Anyone who is trying to change a formerly successful orgazation will benefit from reading Gerstner’s thoughts on change management. Beware: the book starts out slow, turning off many readers. But after the first 20 pages, Gerstner’s training as an organizational consultant provides him the analytic language to lay out what are the key challenges in changing large organizations. Because he was an outsider at IBM, he has no reservations to analyze how IBM got itself into a near death experience.  I highly recommend this book.

The Freedom Tower Case: Why is group decision making not better individual decisions

Individual human beings have limited skills, knowledge,  and expertise can get carried away by emotions when making decisions. One would think that involving multiple people in a decision could overcome the limitations of individual decision making but social psycholgoists have long known that groups have their own limitations. The New York Times published a pertinent article on how a comittee came up with the redesigned Freedom Tower that architectual critics find dissappointing given the grandeur of the originial proposal. 

Five Tips for Strategies for Organizational Change courtesy of Motorola’s New CEO

Commanding Heights: The Battle for the World Economy

Rarely have I seen such a powerful documentary about how ideas shape the world. The film traces the ideas that shaped macro-economic policy making over the course of the 20th century. The film will be eye-opening for people who know very little how economic policy powerfully effects the welfare of societies all over the world. Even if you are a scholar familiar with the history of the 20 century, you will enjoy this fantastic piece of work. One word of clarification. Sophisticated scholars who believe in “free” markets believe in a need for laws. (The film originally aired on PBS and is now available on DVD.)

What Companies do to Make Life Easier for Their Employees

The WSJ in today’s report on leadership published an interesting article on what kind of perks companies provide to boost the morale of people and to make work life easier. “Fun perks didn’t end with the dot-com bust. They just changed,” reports Jennifer Saranow.

Read the full article on WSJ.com.

Four More Years of Happiness

Harvard pychology professor Daniel Gilbert predicts that most democrats will not be depressed during the next four years of George Bush. Here is the rationale that he offers in today’s New York Times: Research suggests that human beings have a remarkable ability to manufacture happiness. For example, when people in experiments are randomly awarded one of two equally valuable prizes, they quickly come to believe that the prize they won was more valuable than the prize they lost. They are often so surprised by their apparent good fortune that they refuse to believe the prize was awarded randomly, and they are generally unwilling to swap their prizes even when the experimenter offers to sweeten the deal with a little extra cash.

Malcom Gladwell’s Book “Blink” is out!

In my introductory management class I discuss the how cognitive heuristics (rules of thump) help us navigate our complex daily lives and make decisions before it is too late. Malcom Glawell new book describes this quick decision-making capability with many examples. I will review the book during the next couple of months, but in the meantime you can read excerpts from the book on Gladwell’s website.  David Brooks has written a very thoughtful review of the book in the New York Times that you can read here.

Gladwell and Surowiecki Debate How Good Decisions are made

Galdwell and Surowiecki have a new books coming out concerned with good decision making. I am presently reading Surowieki’s The Wisdom of Crowds and have Blink on my reading list. You can read a debate they both had about their books in Slate

Experience Gestalt Pictures

My former student John Tsau forwarded me some other examples of pictures that can be seen in different ways. What we can see is to a large extent conditioned what we expect to see in the world in the first place…

The Tipping Point

Defining that precise moment when a trend becomes a trend, Malcolm Gladwell probes the surface of everyday occurrences to reveal some surprising dynamics behind explosive social changes. He examines the power of word-of-mouth and explores how very small changes can directly affect popularity. Perceptive and imaginative, The Tipping Point is a groundbreaking book destined to overturn conventional thinking in business, sociological, and policy-making arenas.

Overall judgement: This is a superb book and should be read by every student of the social world.

Courses Archives

Lehman Brothers’ did not Walk to Talk of its Mission Statement

Dramatic Challenge to Barnes & Nobles Business Model

This one of the most vivid examples of challenges to the existing business model of a firm. The Wall Street Journal reports:

Google’s New Search Homepage: Integrating Quantitative and Qualitative Data as well as Intuitions

Excellent Overview of the Philosophy of Social Sciences

Daniel Little’s article for the Cambridge Encyclopedia of Philosophy provides an excellent overview of the key issues in the philosophy of social sciences. You can read it here.

Logical Incrementalism in Product Development

The Power of Infinity

Steven Strogatz explains beautifully how the concept of inifinity first tripped up philosophers but then provided them with a powerful tool to calculate things that could not be calculated without taking things to inifity. I wish I had had as good a math teacher as Strogatz. The lesson here is also that Strogatz does not provide a solution to Zeno’s paradox but that he shows that even without fully removing the puzzles around infinity one can use the concept to get more knowledge in other areas.
Read his column Take It to the Limit.

Apple with only 7% of Sales account today for 35% of Industry Profits

According to a Business Insider article, the banking giant has aggregated numbers from the top ten PC makers in the world and determined that, while Apple only commands 7 percent of overall revenues in the PC market, its products account for 35 percent of the operating profits. See Full Article.

Blackboard Course Website

For all information and resources regarding the course, UNSW students should log into the Blackboard Course Website.

Couse Outline for Intellectual Foundation of Social Sciences now available

Here you can find the course outline. STRE 8005 More information for enrolled students is available at the UNSW course webpage.

Richard Branson’s Fundamental Objective

The Financial Times posed twenty questions to Richard Branson. Here are the two important ones that touch upon the idea of a fundamental objective.

How important is money?
My priority is learning and trying to improve the world – not being rich.

How do you want to be remembered?
That I have made a difference.

Read full interview.

Duplicity

Rarely is a Hollywood movie such a great teaching instrument. Duplicity gives a wonderful picture of how far large companies go in figuring out what their competition is up to. What’s more, the principles of game theory are very well illustrated by Julia Roberts and Clive Owen, who make a wonderful pair. I recommend that every Strategic Management student watch this film.

Lessons for Entrepreneurs

Rolls-Royce: Transforming its Jet-Engine Business Model

The Economist reports how Rolls-Royse figured out a different way to make money in the jet engine business:
The big pay-off from getting engines under more wings comes from selling spares and servicing them. This is because selling aircraft engines is like selling razors. The razor and engine make little if any profit; that comes later, from blades or spare parts and servicing (see chart 3). Gross margins from rebuilding engines are thought to be about 35%; analysts at Credit Suisse, an investment bank, estimate that some makers of jet engines get about seven times as much revenue from servicing and selling spare parts as they do from selling engines. Many analysts suspect that Rolls-Royce (and others) sell engines at a loss. Judging this is hard, though, because of the way Rolls-Royce accounts for long-term contracts, often by booking a profit on the sale for income that will be received only over many years. Rolls-Royce says that, on average, engines are sold at a profit. The trouble with selling razors at a loss is that someone else may make the blades to fit them. And the juicy margins in engine maintenance have indeed attracted a swarm of independent servicing firms (and engine-makers after each other’s business).

What the Financial Crisis Taught us about Human Decision Making

David Brooks writes in the NY Times:
Once there was just Newtonian physics and the world seemed neat and mechanical. Then quantum physics came along and revealed that deep down things are much weirder than they seem. Something similar is now happening with public policy.Once, classical economics dominated policy thinking. The classical models presumed a certain sort of orderly human makeup. Inside each person, reason rides the passions the way a rider sits atop a horse. Sometimes people do stupid things, but generally the rider makes deliberative decisions, and the market rewards rational behavior. Markets tend toward efficiency. People respond in pretty straightforward ways to incentives. The invisible hand forms a spontaneous, dynamic order. Economic behavior can be accurately predicted through elegant models. This view explains a lot, but not the current financial crisis — how so many people could be so stupid, incompetent and self-destructive all at once. The crisis has delivered a blow to classical economics and taken a body of psychological work that was at the edge of public policy thought and brought it front and center. In this new body of thought, you get a very different picture of human nature. Reason is not like a rider atop a horse. Instead, each person’s mind contains a panoply of instincts, strategies, intuitions, emotions, memories and habits, which vie for supremacy. An irregular, idiosyncratic and largely unconscious process determines which of these internal players gets to control behavior at any instant.

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.

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.

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

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.”

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

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?

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.

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.

Has the Macquarie Group found a way to achieve higher returns without increasing risk?

Read the story on Economist.com

Ford Turnaround

Ford has tried to regain a competitive position a number of times without success. Will the company succeed this time as its struggles for survial. Read article on WSJ.com.

April 24, 2008: In Surprise, Ford Swings to Profit in First Quarter

CEO of GE Discusses Earnings Miss on TV

Part 1
Part 2

Falling margins in Flat Panel TVs force Philips out of North American Producer Market

As prices decline, profits have been increasingly difficult to achieve. According to iSuppli, the average selling price for a 42-inch L.C.D. television has fallen from $2,082 one year ago to $1,544 today, a 26 percent drop. Depending on the manufacturer, the profit margin for that size set is between 9 and 16 percent.

Full Story at NY Times

Coming Soon Superfast Internet

Book Review Instructions

Myer is more valuable after becoming once again independent from Coles

How to get around the difficulty of estimating returns from innovation

Bombardier Recreational Products, based in Quebec, has spent C$225m ($195m) over 11 years developing the Can-Am Spyder Roadster, a three-wheeled motor vehicle. When it goes on sale later this year the $15,000 Spyder will be aimed at baby-boomers who like the idea of riding al fresco but do not feel comfortable on a two-wheeler, says Jose Boisjoli, BRP’s boss. Mr Boisjoli admits that his firm has no idea how much demand there will be for the Spyder. One way to think about how much you should spend on innovation is to ask: how much money can I lose with a failed innovation without jeopardizing the existence of the firm.

Conglomerate Watch: Immelt find it tough to follow Jack Welsh’s act

Understanding the Strategies of Airbus and Boeing

The World’s Most Innovative Companies

Wesfarmers: Interview with Former CEO Michael Chaney

In the spirit of “Where are the Now”, here is an interview with the outgoing CEO of Wesfarmers, Michael Chaney, before he became chairman of the National Australian Bank (NAB).

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