Questions for the weekend

(1) In Universities, how can Economics Departments premising their theories on human rationality co-exist with Consumer Marketing theories, textbooks and courses?

(2) How do the ‘Universalists’ and ‘Citizens of the world’ explain their own and others’ tribal loyalties to football clubs (around the world) and cricket clubs (think IPL in India)?

I have my own answers but I would lik to hear yours.

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Need for luck and learning: constant and continuous

Last week was rich pickings for insightful stories, for me. I still remain captivated by the story, ‘The case against Google’. I blogged on it here.

The next story that I liked immensely was the story in Wall Street Journal on GE under Jeff Immelt.

I like such stories not for the reason that they vindicate my priors (I remind myself not to hold too many of them!) but because they make me think.

This one short paragraph summed up the story rather well:

But Mr. Immelt didn’t like hearing bad news, said several executives who worked with him, and didn’t like delivering bad news, either. He wanted people to make their sales and financial targets and thought he could make the numbers, too, they said. [Link]

Jena McGregor in Washington Post has a good follow-on article on this story. She writes,

The article puts GE well out of its usual role as management exemplar. And it shines a light on a problem endemic to corporate America, leadership experts say. People naturally avoid conflict and fear delivering bad news. But in professional workplaces where a can-do attitude is valued above all else, and fears about job security remain common, getting unvarnished feedback and speaking candidly can be especially hard.

There was an added complication for Jeff Immelt. He was a celebrity CEO. No matter how hard he tried, people would hesitate to share bad news.

From Jane McGregor’s article:

Being led by a celebrity CEO who succeeded a man once named “manager of the century” probably doesn’t help either. Immelt, who rose through GE’s sales and marketing ranks before leading its plastics and health care divisions, became CEO after a high-profile horse race to succeed Jack Welch that catapulted him into the spotlight. One of the most recognized faces of corporate America for the 16 years he held the job (he stepped down last year) Immelt led President Obama’s jobs council and was considered as a veteran corporate hand to replace Uber CEO Travis Kalanick.

Leadership experts say such prestige can create a “social distance” between the CEO and direct reports, even if they make efforts to improve personal relationships. (Immelt, for instance, was known to host dinners with one of the top 185 officers of the company each month at his home and reconvene for a few hours the next morning to talk about their careers and their performance.)

“People tend to not want to tell them the bad stuff,” said Tim Pollock, a professor of business at Penn State University who has studied celebrity CEOs. “They become starstruck; they’re less likely to want to speak up and say negative things.”

As with most things in life, this too could go wrong. You could create an organisation culture where everyone only brings up bad news and uses them as an excuse not to perform or deliver. There is a fine line and no one knows where it is drawn.

It requires repeated experimentation, trial and error, learning by trying and, above all, good luck, to figure out the right balance between fostering a culture of frankness, honesty and of positivism; right balance between awareness of limitations and of strengths too.

In general, today’s world is a high pressure world – not just in jobs or in businesses but in just about everything. From parenting to maintaining social networks, friendships, from pursuing multiple interests. The culture is one of doing so much in so short a time. Efficiency and scale, even in personal lives, pursuits and social interactions, are privileged. They used to be expected only in business organisations.

When people are running everywhere and in every place with no place to rest, pause and reflect, anyone who allows them to step back, reflect and question these will actually be deemed a saviour! People feel grateful to be allowed to voice their self-doubts and inner doubts, their anxieties and frustrations once in a while and feel connected with those who do not hesitate to let them know that they share these too!

Therefore, that CEO or leader who allows his lieutenants the odd opportunity to step back, to say NO and to warn him of over-reaching, should be received with gratefulness and will be reciprocated with trust, commitment and higher motivation actually. That is my guess.

Not without dangers. Someone might take advantage and someone might embarrass the leader publicly about this. Some one in the media might say that the leader is a shirker and the share price might nosedive! The leader will be out of his or her job soon.

It is not that easy to swim against the prevailing currents even if you are convinced that the current will eventually plunge into a ravine. Given time, it will be right. The GE story is an example. The company went with the social norms and ethos of the times – good news, optimism, success, high performance, not taking NO for answers and deadlines are yesterday, etc. Indeed, it defined the ethos and norms of the times. Has it succeeded? Now, we know that it has not.

But, it takes time to know that it does not work. Not many have that luxury of time or luck to take a bet against consensus norms and ethos and succeed. They have to live in a society and be part of it. Humans are social animals. They need to belong. Some of us actually come to like it. It is seductive. It is lonely to be not part of it. Not easy.

The best we can do is to be aware of how excessive any organisational culture can become and modulate it from time to time. No one size fits all and no one culture works in all situations.

Let us also not forget that these articles are appearing with the benefit of hindsight. Note this paragraph in the WSJ story:

Former GE Chief Financial Officer Keith Sherin, who worked alongside Mr. Immelt during challenges such as the financial crisis, said the CEO would methodically approach a problem with his team, consider multiple viewpoints and communicate regularly with the board, making sure executives stayed focused on the most important issues. “I never found him to be overly optimistic,” said Mr. Sherin, who retired in 2016.

To his credit, Jeff Immelt did not preach one thing and practise another. He believed in his model:

At a conference hosted by Axios in November, the month after he stepped down as chairman ahead of schedule, Mr. Immelt noted that GE is “125 years old; we go through cycles,” and said he was “fully confident that this company is going to thrive in the future.”

A spokesman for the former CEO pointed to his decision to purchase $8 million worth of GE shares in 2016 and 2017. That included 100,000 shares in mid-May at a price roughly twice today’s.

The only enduring lesson in all this is that in business as elsewhere, the need for luck and learning is constant and continuous.

An unreasonable assumption

In reviewing two important books that are making the case for incorporating moral considerations into economics turning it from ‘dismal science’ into ‘distinguished science’, Ricardo Hausmann writes,

But with a few reasonable assumptions, such as the idea that more is better than less, you can make many predictions about how people will behave.

The more I think about it, the more I feel that it is not a reasonable assumption at all because if, at any given point in time, more is preferred to less (or, what you have – because what you have can always be less than what you imagine you should have), it is both socially, economically and morally hugely problematic because the answer to that desire is unbounded.

Admission bias in Ivy League

More than two weeks ago, this article appeared in the Wall Street Journal accusing Ivy League institutions in the US as practising discrimination – leaving out Asian students – and casting the attempt by Princeton University attempts to block the government’s release of document that could ‘show discrimination’ in a negative light.  Well, I am not persuaded.

Any Club has the right to decide on whom it would admit as its members. All those who are not admitted can claim discrimination. Any subjective decision can be termed arbitrary. There is a fine line.

If Ivy League Schools decided that they would try to lower the percentage of Asian students in their campuses, that is their prerogative.

An educationist whom I know very well and who does not live in the U.S. wrote me this:

Admissions decisions are inherently subjective when raw data between candidates is broadly equal.  Global admissions data patterns are naturally subject to external economic, social, political and legal considerations.  None of that is defined or definable because those sands are shifting continually.

Total transparency is not possible or even desirable in admissions.  Every decision can be questioned on some grounds or other, but schools need some autonomy to make decisions, within the bounds of reason, ethics and the law of the land.  Wise students learn soon enough that their Destiny cannot be mapped.

Exactly!

Well, this emphasis on foisting diversity (hard to beat that for an oxymoron) is a manifestation of the virulent and toxic and often ridiculous political correctness that is sweeping through American campuses, reminiscent of the 1960s and 1970s – or is it far worse now?

Read this interview by Jonathan Haidt with Wall Street Journal to figure out what he thinks is driving it.

It is up to you to read this story before or after you read the interview – a free speech area in Los Angeles! Bizarre.

Good weekend reads

Sri Lanka Port Loans contributed to the debt trap. But, why did India deny the offer of Trinconmalee port?

Chinese students threaten free speech abroad – Defenders of the global order that Trump is seeking to ‘destroy’?!

The town of Vijayawada immortalises its civil servants and one of them is my co-author and good friend Gulzar Natarajan. Good practice.

Bombay Jayashri makes her debut as a columnist. She might have written one-off articles before, I guess. A very good and nice start.

A lovely article and a very good reminder – on Leo Tolstoy’s ‘The death of Ivan Ilyich’.

If all theories that do not explain reality are thrown out of economics, what would be left?

Neel Kashkari makes the case for deregulation and higher capital requirements on big banks. Good stuff.

A great article on the exploitation in American Universities. Hypocrisy is one successful and enduring example of globalisation. May be, behind a firewall.

Economists would do well to put this up on their walls. A good exercise in spiritual evolution.

Paul Collier’s essay in the ‘Times Literary Supplement’ on saving capitalism may not have a original title but has many quotable and thoughtful lines. Made me buy three of the books reviewed or discussed. Was directed by Emanuel Derman’s quote from one of the paragraphs in the essay in a tweet.

Economics education

Good friend Niranjan sent me this piece from Quartz on the importance of economics education. Overall, the piece was somewhat self-contradicting and not rigorously argued.

Here are two sentences from the piece:
“Economics education, at all levels, aims to offer an overview of different models and how to apply them.”
“An economics education aims to provide framework to better understand how the world works. “
First, the two sentences are contradictory. If the idea is to provide different models, then it must provide more than one framework to understand the world.
Second, the criticism against economics education was that it did not teach different models and different schools of economics to students. It became too homogenous – only the market mattered and that market efficiency was absolute.
Third, there is a difference between models and theories. Economic models or economic theories (if they can be called that) are points of departure to understand the world and why it operates differently from the predictions and inferences of the theory. They do not describe the world.
Most economics teachers did not and do not emphasise that point to their students. These theories are presented as universal and cast-iron truths.

 

 

A tweet that tickled

Very cool to see Professor @rodrikdani discuss why “it depends” is the best answer in economics [Link].

The above tweet that I chanced upon in the Twitter handle of Prof. Dani Rodrik brought a smile to my lips, to my face because this is what I have been telling all my students in the courses I teach. That this is the safest first response to any question in economics. Of course, they have to then proceed to display their substantive knowledge by listing the things on which their answer depends. But, it should buy them time and, more importantly, it is true.

Glad to see the book, ‘Economics Rules’ by Prof. Rodrik is being released.