Author: Pamela Tom

Design Thinking Pioneer Sara Beckman to Expand Role on Campus

| by Pamela Tom

Sara Beckman, a pioneer in design and innovation thinking, is expanding her role on campus as the new Chief Learning Officer of the Paul and Stacy Jacobs Institute for Design Innovation at the College of Engineering, the college announced today.

Beckman will continue her current 50% appointment at Haas and dedicate the other 50% of her time to the new Jacobs Institute, guiding efforts to develop design-related curricula to leverage the capabilities of the Institute. One of her first projects will be to plan a new undergraduate minor in design that will give students across the campus more opportunities to practice hands-on design, prototyping and even commercial development of their inventions in facilitated, multi-disciplinary team settings.

“Sara has brought a lot of innovative thinking to Haas that has helped us to differentiate our MBA program in the marketplace,” says Dean Rich Lyons. “I’m certain she will have a similar positive impact on engineering and on further opportunities for our own Haas undergraduates.”

Beckman first brought design thinking to the Berkeley MBA program 20 years ago, long before it came in vogue at business schools. Inspired by a student who was a designer before entering the MBA program, she launched the first Haas course on design—Design as a Strategic Business Issue—in 1993. Subsequently, along with engineering professor Alice Agogino, she co-founded Managing New Product Development, one of the school’s all-time most popular courses. The course takes teams of engineering, business, and design students from idea to first-pass prototype in one semester, culminating in a presentation to a panel of design judges.

A more recent, ground-breaking achievement was the development of the Problem Finding Problem Solving course (PFPS), a core course in the Berkeley Innovative Leader Curriculum that gives students an appreciation for how to frame and solve problems, leveraging tools and methods from critical, design and systems thinking. The class provides a foundation for follow-on, experience-based project courses. Haas staff have also taken the course, and apply it often in their work as well.

Beckman has had a long-term relationship with the College of Engineering as one of the original co-directors of the Management of Technology Program, a program that brought together business and engineering students around technology management issues. 

“I see the minor in design as a terrific opportunity to renew the bonds between engineering and business at Berkeley around a topic of shared interest—developing in our students the skills needed to design and innovate in collaborative team settings,” Beckman says. 

Lyons agrees: “Business and technology today are so inextricably interwoven that it is key to success in either field to know about the other,” Lyons adds. “With Sara playing a key role at both schools, we look forward to building new bridges and opportunities.”

Sara Beckman (right) with MBA students

New Competition to Test Students’ Trading Skills

| by Pamela Tom

Teams of graduate students will test their ability to maximize profits while keeping their cool in the first-ever Berkeley-Haas Trading Competition Sept. 12.

The virtual trading competition, hosted by the Berkeley Master of Financial Engineering Program, will feature real-time trading across a number of asset classes. Individual trading events will simulate scenarios where there is opportunity for profit or loss and will challenge participants’ ability to handle a wide range of market conditions. Students will use the same order management system utilized at leading investment banks and hedge funds.

No real money is involved and there is no cost to compete. Students can sign up at https://berkeley.qualtrics.com/SE/?SID=SV_eIMGiGrDvJgmxUx.

"The decision to have this competition stems from the strong interest shown by alumni in the past, especially from the class of 2013," says Linda Kreitzman, executive director of the Master of Financial Engineering Program. "It is also a great opportunity to bring together students from other programs at Haas, including MBA students, and other units on campus."

The competition is open to graduate students from Haas, electrical engineering and computer sciences, industrial engineering and operations research, chemical and biomolecular engineering, mathematics, statistics, and economics. Teams of two students each will compete against each other.

The competition will begin with an orientation and Q&A session with refreshments from 10 a.m. to 11 a.m. Sept. 12. Trading will begin at 11 a.m. and last until 3 p.m. in the MFE Lab in room 270 on the second floor of the Haas library. Winners will be announced shortly after the last trade.

Practice servers were made available 24 hours a day 7 days a week starting Thursday, Aug. 29, and all cases will be available by Sept. 6.

More information on the Berkeley-Haas Trading Competition is available at http://mfe.berkeley.edu/academics/trading.html.

 

Morse Honored for Research on Greek Tax Evasion

| by Pamela Tom

Assistant Professor Adair Morse received the 2013 Best Empirical Finance Paper Award at the Western Finance Association Meeting for an article on Greek income tax evasion that attracted significant media coverage and helped shape tax policy.

The award was presented by Wharton Research Data Services, a research platform and tool for corporate, academic, and government institutions. Morse shared the award with her co-authors, Margarita Tsoutsoura of the University of Chicago Booth School of Business and Nikolaos Artavanis of the University of Massachusetts, Amherst.

"Their work has received unprecedented media coverage and has already ushered in significant changes in the Greek tax policy," Wharton Research Data Services wrote in announcing the award, which was presented at the Western Finance Association conference in June.

The trio's widely cited paper, “Tax Evasion Across Industries: Soft Credit Evidence From Greece,” examined Greek income tax evasion, banking, and credit. Morse and her co-authors found that wide-scale tax evasion in Greece accounts for at least $28 billion Euros in unreported taxable income – just among the self-employed. Using bank data on household borrowing from 2003 to 2010, they found that highly paid, highly educated professionals are at the forefront of tax evasion in Greece, including doctors, engineers, private tutors, financial services agents, accountants, and lawyers.

The researchers reviewed credit applications for consumer credit products at one of the ten large Greek banks from 2003 to 2010. They studied situations in which borrowers requested more money than they received from the bank. In these situations, Morse used the bank decision on the appropriate credit level to understand how much income the bank must have perceived individuals to have to back up the bank’s estimate of true income (versus taxed income). The authors termed such lending “soft credit” since the information about true income is soft information. The researchers infused this new insight with the observation that Greek banks have learned to adapt to an economy where income is often hidden to remain competitive.

The team's research was presented in Greece in September 2012 and already the Greek government is making policy changes in response to it. The Greek government has decided to eliminate tax-free income and is shifting to a model in which professionals carry some of the burden of proof of not having hidden income.

Beyond this direct impact, the researchers hope their work broadens both policy and academic perspectives on how institutions and businesses adapt to tax evasion endemic to occupations or sectors, and how countrywide economic outcomes can be sensitive to these adaptations.

Prof. Laura Tyson Testifies on Corporate Taxes

| by Pamela Tom

Testifying before the U.S. Congress Joint Economic Committee Wednesday, Haas Professor Laura Tyson called for lower U.S. corporate tax rates to help the U.S. compete on a global stage.

"Today our corporate tax system is failing our country," said Tyson, former chair of the President's Council of Economic Advisors under President Bill Clinton. "It's reducing the competitiveness of the U.S. as a place to do business and create jobs."

Tyson's testimony came during a joint House and Senate committee hearing titled "Lessons from Reagan: How Tax Reform Can Boost Economic Growth."

Tyson argued that a higher corporate tax rate in the United States compared to other countries in the world currently encourages American companies to hold their foreign earnings abroad. 

"Tax rates have an effect on where companies locate their operations, locate their jobs, and report their income," she said.

In written testimony, Tyson showed how the U.S. corporate tax rate has hovered around 39 percent since the early 1990s while countries in the Organization for Economic Cooperation and Development (OECD) have reduced their corporate tax rates from to an average of about 25.1 percent today.

Tyson suggested eliminating tax breaks and preferences to offset the drop in revenue that would result from lower corporate taxes. That would also reduce the complexity of the tax code and increase its efficiency, she noted.

"The good news on corporate taxes is there is widespread bipartisan agreement that the system is flawed and needs fundamental reform," she said. "We are on a path where we can get meaningful corporate tax reform….We should get going and do it."

Watch the Joint Economic Committee Testimony

Are You Hiring the Wrong Person?

| by Pamela Tom

Study finds hiring managers often make poor choices because they systematically rely strictly on generic performance measures rather than considering situational context.

Have you ever applied for a job and wondered why it is offered to someone who appears to be less qualified than you?  A new study by Associate Professor Don Moore finds employment managers tend to ignore the context of past performance.  

The article, “Attribution Errors in Performance Evaluation,” (PLoS One, July 24, 2013), is co-authored by Samuel A. Swift, a Berkeley-Haas post-doctoral fellow; Zachariah S. Sharek, director of strategy and innovation at CivicScience; and Francesco Gino, associate professor at Harvard Business School.

“We would like to believe that the people who are making judgments that affect our lives—where we get hired or what school we are admitted to—have the wisdom to understand who we are, what we are capable of, what shortcomings aren’t our fault,” says Moore, “But our research shows people evaluating us have a great deal of trouble considering situational factors or context.”

Study participants were asked to evaluate a situation similar to this hypothetical scenario:

John and Dave are applying for a senior management position at Los Angeles International Airport (LAX). John works at the Oakland International Airport (OAK), and David works at San Francisco International (SFO). They offer comparable experience. One key measure of performance for the LAX job is the percentage of flights that leave on time at the applicant’s airport. SFO is considered to be the more difficult airport to land planes, in part because it has more overcast days and only two of four runways in use. Therefore SFO rates lower in on-time departures, and John from OAK gets the job.

In addition to studying hiring decisions by human resource managers, the researchers also studied graduate school admissions decisions and found similar results. For example, applicants with higher GPAs from schools known for easier grading systems beat out applicants with lower GPAs from universities with stricter grading policies.

“Our results suggested that alumni from institutions with lenient grading had a leg up in admission to grad school, and the reason for that is the admissions decision makers mistakenly attributed their high grades to high abilities,” says Moore.

Moore describes this behavior as an example of the “correspondence bias”—a social psychology term that describes when people have the tendency to draw inferences about a person’s disposition while ignoring the surrounding circumstances.

The study found that while the decision makers said they wanted to consider situational influences on performance, when given the opportunity, they failed to do so. The paper documents a systematic bias in the habit of thought.

Moore, however, remains hopeful that changing that behavior is possible on an individual and collective level.

“If you are a hiring manager, ask for more information about other people in the applicant’s department and how the person you are considering is better or worse than others in the same situation,” says Moore, “If you are an admissions director, ask for class rank.” In addition, Moore says, applicants should offer more information about their performance.

See full paper.

Assoc. Prof. Don Moore finds employment managers tend to ignore the context of past performance. “We would like to believe that the people who are making judgments that affect our lives—where we get hired or what school we are admitted to—have the wisdom to understand who we are, what we are capable of, what shortcomings aren’t our fault,” says Moore, “But our research shows people evaluating us have a great deal of trouble considering situational factors or context.”

UC Berkeley and MIT Launch Energy-Efficiency Research Project

| by Pamela Tom

Energy efficiency promises to cut emissions, reduce dependence on foreign fuel, and mitigate climate change. As such, governments around the world are spending tens of billions of dollars to support energy-efficiency regulations, technologies, and policies.

But are these programs realizing their potential? Researchers from Berkeley-Haas and the MIT Energy Initiative (MITEI) have collaborated to find out.

The researchers’ energy-efficiency research project, dubbed “E2e,” is a new interdisciplinary effort that aims to evaluate and improve energy-efficiency policies and technologies. Its goal is to support and conduct rigorous and objective research, communicate the results, and give decision-makers the real-world analysis they need to make smart choices.

The E2e Project is a joint initiative of the Energy Institute at Haas and MIT’s Center for Energy and Environmental Policy Research (CEEPR), an affiliate of MITEI—two recognized leaders in energy research.

The project’s name, E2e, captures its mission, the researchers say: to find the best way to go from using a large amount of energy (“E”) to a small amount of energy (“e”), by bringing together a range of experts—from engineers to economists—from MIT and UC Berkeley. This collaboration, the researchers say, uniquely positions the E2e Project to leverage cutting-edge scientific and economic insights on energy efficiency.

“When deciding on the best energy measures to implement, decision-makers should compare model predictions to actual consumer behaviors. That’s where this project comes in,” says Catherine Wolfram, associate professor and co-director of the Energy Institute at Haas. “The E2e Project is focused on singling out the best products and approaches by using real experiments centered on real buying habits. It will provide valuable guidance to government and industry leaders, as well as consumers.”

Wolfram is leading the project with Michael Greenstone, MIT’s 3M Professor of Environmental Economics and a member of MITEI’s Energy Council, and Christopher Knittel, co-director of CEEPR.

“Cutting energy has lots of potential to help us save money and fight climate change,” says Greenstone. “It’s critical to find the local, national and global policies with the biggest bang for the buck to use governments’, industry’s and consumers’ money wisely while slowing climate change.”

The group’s motivations for studying energy efficiency are derived, in part, from the McKinsey Curve—a cost curve that shows that abating emissions actually pays for itself.

“Our goal is to better understand what the costs and benefits of energy-efficient investments are—where the low-hanging fruit is, as well as how high that fruit is up the tree,” says Knittel, MIT's William Barton Rogers Professor of Energy Economics at the MIT Sloan School of Management. “The McKinsey curve would suggest the fruit’s already on the ground. If this is true, we want to figure out why no one is picking it up.”

Former U.S. Secretary of State George P. Shultz, a member of the E2e advisory board, says, “I like the saying ‘A penny saved is a penny earned,’ which rings true from the standpoint of energy. Energy that is used efficiently not only reduces costs, but is also the cleanest energy around. The E2e Project will allow us to better understand which energy-efficiency programs save the most pennies.”

Shultz is a distinguished fellow at Stanford University’s Hoover Institution, where he leads the Energy Policy Task Force. The board also includes MIT Institute Professor John Deutch, former undersecretary of the Department of Energy; Cass Sunstein, a professor at Harvard Law School and President Obama’s former director of regulatory affairs; Susan Tierney, managing principal at Analysis Group and a former Department of Energy official; and Dan Yates, CEO and founder of Opower.                                                 

The E2e Project seeks to answer questions such as: Are consumers and businesses bypassing profitable opportunities to reduce their energy consumption? What are the most effective ways to encourage individuals and businesses to invest in energy efficiency? Are current energy-efficiency programs providing the most savings?

The project’s first experiments are already underway. For example, the team is tracking consumers’ vehicle purchasing decisions to discover if better information about a car’s fuel economy will influence consumers to buy more fuel-efficient vehicles. If so, emphasizing the calculated fuel savings in the vehicle information presented to consumers may be productive.

Other initial projects include evaluating the Federal Weatherization Assistance Program, and determining why households invest in energy efficiency and the returns to those investments.

The E2e Project was funded with a grant from the Alfred P. Sloan Foundation

Visit the E2e website at e2e.haas.berkeley.edu or e2e.mit.edu.

Read the Washington Post article on E2e.

Prof. Dwight Jaffee Testifies in Congress on Fannie Mae and Freddie Mac

| by Pamela Tom

Private markets should take over government-sponsored enterprises Fannie Mae and Freddie Mac's role in guaranteeing against mortgage borrower defaults, Professor Dwight Jaffee told members of the House Financial Services Committee in Washington, D.C., Wednesday.

"Experience indicates new government mortgage guarantee program would again leave taxpayers at high risk, while creating little or no sustainable increase in American home ownership," said Jaffee during hearings on reforming the U.S. housing finance system.

Jaffee provided details on how Fannie and Freddie have had little impact in expanding U.S. home ownership rates and suggested that their ability to offer a slightly lower interest rate on conforming loans because of their implicit government guarantee was simply "crowding out" the private markets from offering conforming loans.

Jaffee also drew a comparison to Western European countries, which are prohibited by European Union rules to create government sponsored entities like Freddie and Fannie.

"The results show the European countries outperforming the U.S. on virtually every measure of housing and mortgage market performance," Jaffee said. "Perhaps the most stunning result is that the U.S. home ownership rate equals only the average of 15 major Western European countries."

Read Jaffee's Testimony on Fannie Mae and Freddie Mac

Making a Case for Transparent Corporate Accounting Information

| by Pamela Tom

Prof. Yaniv Konchitchki finds accounting earnings transparency increases shareholders’ value

A new study by accounting professor Yaniv Konchitchki finds greater transparency in firms’ earnings has a positive effect on the bottom line.

“Cost of Capital and Earnings Transparency,” (published in the Journal of Accounting and Economics, April-May 2013) establishes that the transparency of a firm’s accounting earnings is a telling indicator of the company’s cost of capital and thus its valuation, according to Konchitchki.  The paper is co-authored with Mary E. Barth, Stanford Graduate School of Business, and Wayne R. Landsman, University of North Carolina at Chapel Hill’s Kenan-Flagler Business School.

Cost of capital is defined as the rate of return that capital could be expected to earn in an alternative investment of equivalent risk.  It is used to evaluate new projects within a company to give investors information and assurance of a minimum return for providing capital.

The paper, says Konchitchki, has the potential to change how capital market participants consider the quality of accounting data from corporate financial statements because the findings illuminate the importance of transparency for stock valuation.  “Our findings are especially notable today, when these market participants are concerned with accounting financial statements becoming less transparent and thus less useful,” says Konchitchki.  “In fact, many blame corporations’ lack of accounting transparency for the recent financial crisis in the U.S. and the recession that followed.”

A firm’s valuation is often determined by discounting future cash flows by the firm’s cost of capital, Konchitchki explains.  The study finds that the cost of capital is negatively related to transparency.  Intuitively, when there is less earnings transparency, the risk to investors is higher, resulting in higher cost of capital.  Likewise, if there is more earnings transparency, one has access to more information about a company’s value by observing its earnings, resulting in lower risk and, in turn, lower cost of capital. Ultimately, lower cost of capital equates to higher firm value.

Konchitchki says the study’s conclusion becomes clearer by observing the calculations: the cost of capital is the important denominator when calculating a company’s value.  If future cash flows provided by the investment are divided by the cost of capital, the result equals the value of the investment, i.e., the firm value.

Konchitchki, assistant professor, Haas Accounting Group, specializes in capital markets research and financial statements analysis.  He particularly examines the usefulness of accounting information through its links to macroeconomics (e.g., inflation; GDP) and valuation (e.g., cost of capital; asset pricing).

The researchers studied a sample of publicly traded U.S. companies over a 27-year period.  They tested their hypothesis that transparency affects a firm’s value by modeling how the cost of capital changes dependent on the lack or abundance of information.  They considered “transparency” on a range from zero percent to 100 percent whereas categories of information may include sales, growth, management quality, global offices, cost of goods sold, etc.  For example, 100 percent earnings transparency means that accounting earnings offer the ability to fully explain changes in a firm’s value. Lower percentages of transparency means more information than earnings is needed to explain changes in a firm’s value.

Konchitchki refers to the economic mechanism that drives the link between transparency and cost of capital as the “information asymmetry” effect.

“When the amount of available information is not symmetrical, some investors will have more information, others will have less. This drives the significant negative relation between earnings transparency and the cost of capital, and thus our paper also provides the economic intuition that links between transparency and valuation,” says Konchitchki.

See full paper.

A new study by accounting professor Yaniv Konchitchki finds greater transparency in firms’ earnings has a positive effect on the bottom line. “Cost of Capital and Earnings Transparency” (published in the Journal of Accounting and Economics, April-May 2013) establishes that the transparency of a firm’s accounting earnings is a telling indicator of the company’s cost of capital and thus its valuation, according to Konchitchki.

MBA Venture Aimed at Wine Aficionados Wins $100K

| by Pamela Tom

Raise a glass to Pristine, a Berkeley MBA startup that uses smartphone technology to enhance the wine-drinking experience—and is now $100,000 stronger thanks to a grant from Founder.org.

Vik Thairani, Srinivas Chervirala, and Pontus Lindberg, all MBA 13 , are the co-founders of Pristine, a maker of wine labels and tags that prevent pulling the cork on bottles that may have suffered heat damage. Since last December Pristine has been based at SkyDeck, a startup accelerator and joint venture between the Haas School’s Lester Center for Entrepreneurship, UC Berkeley’s College of Engineering, and the Vice Chancellor of Research Office. VP of Sales Nedda Bakhshi is also part of the Pristine founding team.

“Berkeley is the single biggest thing that could have happened to us,” says Thairani, the startup's CEO. “It brought the entire team together and gave us the knowledge to take an idea and turn it into a business, as well as the additional opportunities that came through SkyDeck and the UC Berkeley Startup Competition. I couldn’t see Pristine as having happened without Haas.”

All teams that made it to the semifinals in the UC Berkeley Startup Competition werebe eligible for the $100,000 funding grant and mentorship program from Founder.org, the competition's newest sponsor this year.

Another SkyDeck venture, Eko Devices, also won a Founder.org grant. Pristine and Eko emerged from 50 semifinalist teams to be among the 10 grant winners from Founder.org's partner schools, which also include Stanford, Penn State, and Harvard.

Founder.org is a nonprofit foundation established by entrepreneur and venture capitalist Michael Baum, who founded the machine data management company Splunk. Founder.org aims to help students become founders of impactful companies.

Read more about the Berkeley winners on the SkyDeck Blog

Pristine founders Nedda Bakhshi; Vik Thairani, Srinivas Chervirala, and Pontus Lindberg, all MBA 13

Finance Prof. Martin Lettau Honored with 2013 AQR Insight Award

| by Pamela Tom

Finance Professor Martin Lettau has received the 2013 AQR Insight Award for his research about how an extension of the widely taught capital asset pricing model can explain returns of equity, commodity, sovereign bonds, and currencies and offer a unified risk view of these investments. 

The winning paper, “Conditional Currency Risk Premia,” is co-authored with Haas alumnus Matteo Maggiori, PhD 12, and Michael Weber, a current Haas PhD student.  They will share the first prize of $60,000.

The paper weighs into the ongoing debate on whether currency returns can be explained by their exposure to risk factors.  The authors find that currency returns can be explained by a risk model where investors are particularly concerned about downside risk, called “the downside risk capital asset pricing model.”

According to Lettau, it is well known that high-yield currencies earn higher returns than low yield currencies.  The authors show that returns of high-yield currencies are highly correlated with aggregate market returns when market returns are particularly low.  Low-yield currencies have the opposite correlation pattern.  If investors are particularly concerned about times when market returns are very low, the difference in downside risk of high-yield currencies relative to low-yield currencies can explain their differences in returns.  This relationship is characteristic not only of currencies but also of equities, commodities, and sovereign bonds, thus providing a unified risk view of these markets.

Lettau is a member of the Haas Finance Group and the Kruttschnitt Family Chair in Financial Institutions.

The winning paper was presented to AQR investment teams in Greenwich, Conn., last month.

Applied Quantitative Research (AQR) provides global investment services, including investment philosophies based on empirical finance research.  AQR established the Insight Award to honor finance research that offers significant practical implications for improving investment performance.

“This paper is an example of relevant empirical research motivated by economic intuition and financial theory. It explores the implication of securities’ downside risk (the risk of losses during period of market distress), a topic of extreme relevance for both asset managers and investors,” says AQR co-founding principal David G. Kabiller. “This is the precisely kind of empirical research the AQR Insight Award was created to encourage: rigorous, relevant empirical analysis motivated by economic theory.”

See the full paper.

Finance Professor Martin Lettau has received the 2013 AQR Insight Award for his research about how an extension of the widely taught capital asset pricing model can explain returns of equity, commodity, sovereign bonds, and currencies and offer a unified risk view of these investments. The winning paper, “Conditional Currency Risk Premia,” is co-authored with Haas alumnus Matteo Maggiori, Ph.D. 12, and Michael Weber, a current Haas PhD student.

Two Finance Scholars Join Haas Faculty

| by Pamela Tom

Two professors, both recognized by the Journal of Finance for their insightful research, have joined the Haas Finance Group as permanent faculty members.

Professor Annette Vissing-Jørgensen, formerly a professor at Northwestern University’s Kellogg School of Management, and Assistant Professor Adair Morse, formerly an associate professor at the University of Chicago’s Booth School of Business, have both been visiting faculty members at Haas since July 2012.

“We are just delighted to have such a terrific pair of new faculty members coming to Haas. Both Annette and Adair are superlative scholars and great teachers; we couldn't be happier to have them joining us at Cal,” says Andrew Rose, associate dean for academic affairs and chair of the faculty.

Vissing-Jørgensen is the Arno A. Rayner Chair in Finance and Management. Her research focuses on empirical asset pricing and household finance (particularly stock market participation and more recently, the special role played by Treasuries), private equity and entrepreneurship, and disclosure regulation. Her work has been published in leading finance and economics journals such as the Journal of Finance, Journal of Political Economy, American Economic Review, and Quarterly Journal of Economics. She won the Journal of Finance Brattle Prize (Distinguished Paper) in 2005 for the paper, "Testing Agency Theory With Entrepreneur Effort and Wealth." 

In addition, Vissing-Jørgensen has won several teaching awards at Kellogg, is an associate editor of the Journal of Finance, and is a director for both the American Finance Association and the European Finance Association. She taught the Haas School’s Introduction to Finance class in fall 2012. She earned her PhD from the economics department at MIT.

"I'm very excited to be joining Haas and hope to contribute to making the MBA experience here even better, both in terms of new teaching initiatives and by bringing recent research into the classroom," Vissing-Jørgensen says. "We have to make sure that we don’t just talk a lot about the importance of innovation but exemplify this in our own teaching."

Morse’s research focuses on a wide range of topics from entrepreneurship and household finance to asset management and corporate governance. "I try to use my research energy to put information in the public realm that levels the playing field," says Morse. "For example, my work on tax evasion in Greece has had a material impact on the debates in Greek Parliament and how the people see solutions to the terrible recession they are going through."

Morse’s paper on how disclosing information about fees on payday loans affects borrowing decisions earned her the prestigious first place Brattle Prize from the Journal of Finance. Implications from her work on corporate fraud appear in the Dodd Frank Act. The Haas Executive Committee honored Morse with a Schwabacher Fellowship, the highest honor that the Haas School bestows upon assistant professors. Morse received her PhD in finance from the University of Michigan’s Ross School of Business.

Annette Vissing-Jørgensen and Adair Morse

San Francisco Business Times Honors Four Haas Women

| by Pamela Tom

Four members of the Haas community were recently recognized by the San Francisco Business Times as the most influential women in Bay Area business.

The newspaper recognized Joy Chen, BS 87, CEO of Yes To Inc.; Carrie Dolan, BS 87, MBA 97, CFO of the Lending Club; Mary Francis, MBA 06, chief corporate counsel, Chevron; and Maria Nondorf, executive director of the Haas School's Center for Financial Reporting and Management. They are among 140 women who the Business Times will honor at a dinner in San Francisco June 6.

Chen (left) told the Business Times her proudest accomplishment was supporting Second Wind, an urban ministry concept led by two talented ministers who took on the challenge to fulfill a need within San Francisco. Chen spoke earlier this year at the student-organized Women in Leadership Conference at Haas.

Dolan (right) gave this advice to women seeking to advance in their careers: "I encourage woman to work on knowing themselves, being clear about what they want and understanding how others perceive them. It is important to be confident about your strengths and proactively work to make those strengths visible."

Francis (left) said her female role model was former U.S. Supreme Court Justice Sandra Day O'Connor. "She didn't let early views of women as lawyers hold her back," Francis told the Business Times. "She was expert at mediating consensus, taking a long view, and choosing only battles that mattered to her."

Nondorf (right) said her female role model is Julia Child. Asked how she uses her influence, Nondorf replied, "I preach the importance of financial literacy." Her personal social media strategy: "Don't be afraid to say what no one else will."

Nondorf also was recently highlighted in a list of the "Top 20 Women Professors in California," compiled by Online Schools California.

Socially Responsible Investment Fund Launches Capital Campaign

| by Pamela Tom

Not many investment funds can boast a five-year return of better than 50 percent. Fewer still are run by graduate students. But the Haas Socially Responsible Investment Fund (HSRIF) meets both criteria, and has become an important training ground for future investment managers as well as a significant source of income for the Haas School’s Center for Responsible Business (CRB).

Hoping to build on the success of the fund and the class in which students manage the fund's portfolio, the CRB has launched an ambitious program to boost the fund’s capital to $15 million from its current level of nearly $2 million. Having more money to work with, says CRB Executive Director Jo Mackness, will serve three purposes:

  • Give students real-world experience managing a larger, more diversified portfolio that includes asset classes beyond equities.
     
  • More deeply engage and educate the investor community who have donated to the fund, are sitting on the fund’s advisory committee, and are closely tracking its progress.
     
  • Make HSRIF large enough to fully fund the center’s annual operating budget, thus becoming a real-life model of a nonprofit that is self-sustaining in the long run.

Unlike traditional classes in which students build model portfolios and track theoretical returns, the dozen students in the HSRIF class are buying and selling equities using investors’ money.

“The students learn to manage a real, active investment portfolio, which includes stock picking, performance attribution, and portfolio construction—basically all the material we teach in a standard investment class. But the fund provides the students with the opportunity to apply this knowledge,” says Nadja Guenster, a visiting assistant professor at Haas who teaches the class.

Clearly, the student “principals” are doing something right. When the fund was launched and students made the first investments in 2008, thanks to donations from three Haas alumni, it had a capitalization of $1.1 million and was the first student-managed investment fund at a top business school to use socially responsible criteria. By spring 2013 it had grown by 54 percent to $1.7 million.

Selecting profitable companies that are also socially responsible is challenging. “We grappled with grey areas to understand what sorts of investments met the criteria,” says Wendy Walker, MBA 11, who took the class. “Walmart is good on environmental issues, but has a poor labor record. So what do we do?”

The fund did invest in Walmart, but divested a year later when the company was tarnished by a bribery scandal in Mexico, says Garnett Booth, MBA 14, a student in the class.

On the other hand, “there are companies that at first glance don’t seem like they’re socially responsible, but really are,” he says, citing the Norfolk Southern Railway, whose business removes thousands of polluting trucks from the highway.

After graduation, Walker joined Cambridge Associates, where she now is an investment consultant, one of three HSRIF class veterans at the firm. Walker is also a member of the CRB’s Investment Advisory Committee. “Advisory means just that. We advise the students on the investment strategy and process, but the ultimate decision is theirs,” she says.

Watch a video about the Haas Socially Responsible Investment Fund

Read More About the Haas Socially Responsible Investment Fund

Jo Mackness, Executive Director, Center for Responsible Business

Bonuses for Doctors Pay Off for Patients

| by Pamela Tom

A study in Rwanda by Prof. Paul Gertler shows that financial incentives for medical providers improve service and health outcomes.

Video: Watch Prof. Gertler talk about his research.

Everyone knows money talks. Prof. Paul Gertler found this to be the case in Rwanda, where, in conjunction with the national government, he evaluated a new and novel pay-for- performance model for the health care industry designed to increase access to high quality maternal and child health services.

He outlines his findings in his paper, “Using Performance Incentives to Improve Medical Care Productivity and Health Outcomes,” co-authored by Christel Vermeersch, a World Bank senior economist.

“Instead of investing more in the current healthcare system, we can try to get more out of our existing resources. The problem in Rwanda and most of the world is that medical care providers’ deliver a quality of care that is below their capabilities and training,” says Gertler, director of the UC Berkeley Clausen Center for International Business and Policy and the Li Ka Shing Foundation Chair in Health Management.

Gertler found that when providers were offered financial incentives, their compliance with clinical care guidelines increased by 30 percent and their productivity increased 20 percent. The study showed that these improvements resulted in large increases in child health outcomes as measured by increased height and weight of children treated by these providers. 

The Rwandan government offered health care providers payments for services such as institutional childbirth deliveries and emergency referrals to hospitals for obstetric services, new contraceptive user visits, referrals of at-risk pregnancies to hospitals, and referrals of malnourished children to higher level facilities for treatment. For example, a provider receiving $.55 for four standard prenatal care visits received $1.47 for providing higher quality care such as administering tetanus and malaria vaccines or detecting a high-risk patient and referring her to a hospital.

The pay-for-performance model is now being tried in Africa and parts of Latin America and is an important part of Obamacare, according to Gertler.  “One of the nice things about the Affordable Care Act or Obamacare is the plan to offer financial incentives for providers,” Gertler explains. “If we are going to make progress in reducing costs of Medicare and Medicaid, pay for performance can make the system more efficient and dramatically improve the quality of health care.”

See the full paper.

Everyone knows money talks. Prof. Paul Gertler found this to be the case in Rwanda, where, in conjunction with the national government, he evaluated a new and novel pay-for- performance model for the health care industry designed to increase access to high quality maternal and child health services.

He outlines his findings in his paper, “Using Performance Incentives to Improve Medical Care Productivity and Health Outcomes,” co-authored by Christel Vermeersch, a World Bank senior economist.

Bonuses for Doctors Pay Off for Patients

| by Pamela Tom

Everyone knows money talks. Prof. Paul Gertler found this to be the case in Rwanda, where, in conjunction with the national government, he evaluated a new and novel pay-for- performance model for the health care industry designed to increase access to high quality maternal and child health services.

He outlines his findings in his paper, “Using Performance Incentives to Improve Medical Care Productivity and Health Outcomes,” co-authored by Christel Vermeersch, a World Bank senior economist.

"Instead of investing more in the current healthcare system, we can try to get more out of our existing resources. The problem in Rwanda and most of the world is that medical care providers’ deliver a quality of care that is below their capabilities and training," says Gertler, director of the UC Berkeley Clausen Center for International Business and Policy and the Li Ka Shing Foundation Chair in Health Management.

Gertler found that when providers were offered financial incentives, their compliance with clinical care guidelines increased by 30 percent and their productivity increased 20 percent. The study showed that these improvements resulted in large increases in child health outcomes as measured by increased height and weight of children treated by these providers. 

The Rwandan government offered health care providers payments for services such as institutional childbirth deliveries and emergency referrals to hospitals for obstetric services, new contraceptive user visits, referrals of at-risk pregnancies to hospitals, and referrals of malnourished children to higher level facilities for treatment. For example, a provider receiving $.55 for four standard prenatal care visits received $1.47 for providing higher quality care such as administering tetanus and malaria vaccines or detecting a high-risk patient and referring her to a hospital.

The pay-for-performance model is now being tried in Africa and parts of Latin America and is an important part of Obamacare, according to Gertler.  “One of the nice things about the Affordable Care Act or Obamacare is the plan to offer financial incentives for providers,” Gertler explains. “If we are going to make progress in reducing costs of Medicare and Medicaid, pay for performance can make the system more efficient and dramatically improve the quality of health care.”

Read the Research Paper

EWMBA Venture Pyro-E Takes $100,000 Prize in DOE Competition

| by Pamela Tom

A way to turn tailpipe exhaust into usable electricity garnered $100,000 for two Berkeley MBA students and their teammate at First Look West (FLoW), a national clean energy business challenge developed by the Department of Energy.

Phani Meduri and Sam Gharib, both MBA 15, students in the Evening & Weekend MBA Program, teamed with Meduri’s former PhD classmate Kevin Lu on their venture, which placed first in the FLoW regional finals May 7 at USC. Their Pyro-E device converts waste heat from fuel cell servers, industrial furnaces, and automobile exhaust into electricity, resulting in greater efficiency and reduced fuel costs. “The U.S. market represents a roughly $32 billion opportunity in the form of wasted energy recapture,” says Gharib of the team’s aim to reduce dependency on foreign oil.

Lu developed Pyro-E and joined forces with Meduri–manager of sytems, modeling, and performance testing for AREVA Solar–to commercialize the technology. Meduri, who earned a PhD in mechical engineering at UCLA, brought in Haas classmate Gharib, director of finance at Talon Therapeutics, for finance and operations expertise.

“One of the reasons we were attracted to Berkeley-Haas was that it represented one of the leading centers for the study and practice of entrepreneurship,” says Gharib (top photo). “Phani and I have been able to leverage the resources of the Lester Center, including participation in the UC Berkeley Startup Competition and the Venture Capital Investment Competition.” Adds Meduri (lower photo), “Even though we did not win in the Startup Competition, we learned a lot and got feedback that we then incorporated into our FLoW presentation.”

Pyro-E’s win in the regional competition means the team will compete in the final national event in Washington, D.C., from June 11 to June 13, and the team says they feel well prepared. “We've been able to connect with prominent entrepreneurs and VCs in the Bay Area,” says Gharib, “and the Haas curriculum has really given us the toolkit to understand the dynamics of our market, identify and target a specific customer base, and craft a compelling customer value proposition.”

Tremor Device Team Wins UC Berkeley Startup Competition

| by Pamela Tom


UC Berkeley Startup Competition Winners: Pictured l. to r. are competition co-chair Alex Loa, MBA 14; Resido Medical's Kate Rosenbluth, John Paderi, and Vijay Rajasekhar; Lester Center Executive Director Andre Marquis; and competition co-chair Slava Balter, MBA 14.

A team that has developed a device to help patients with hand and wrist tremors won the grand prize in the 15th annual UC Berkeley Startup Competition Friday.

Resido Medical, the grand prize winner, has developed a small wearable device for patients to improve their hand and wrist tremors without interfering in their ability to perform daily activities.

In addition to the $20,000 grand prize, Resido Medical also took home $5,000 as the Life Sciences Track winner.

Other winners, including Haas students and alumni, were:

  • Energy & Cleantech Track Winner ($5,000): Seismos, a company whose technology was developed by the Berkeley Lawrence Laboratory. Seismos detects and interprets changes in underground oil and gas reservoirs in real time with unparalleled sensitivity by using proprietary software, hardware, and seismic technology. The team includes Haas alumnus Panos Adamopoulos, MBA 01.
     
  • IT & Web Track Winner ($5,000): SweatGuru, an OpenTable-style software platform that provides fitness businesses with a single solution for business management and growth and consumers with a single destination for discovering, reserving, and paying for fitness classes online.
     
  • Product & Services Track Winner ($5,000): Produk.me, a consumer relationship platform to help companies with brand loyalty, up-sales, and product improves. The team includes Haas entrepreneurship lecturer Ajay Bam.
     
  • People's Choice Winner ($5,000): Eventable, a platform that helps marketers convert a customer’s online actions into in-store shopping experiences by promoting events and sales through personalized calendar feeds.
     
  • Elevator Pitch Winner ($2,500): Fresh Picks, a new way of ordering food by connecting busy people who crave home-cooked meals with their neighbors who love to prepare them. The team includes Haas students Minnie Fong, MBA 13, and Katie Fritts, MBA 14.

All semi-finalists also have the opportunity to secure $100,000 in funding grants and mentorship from FOUNDER.org, one of the competition's sponsors.

To compete, each team must have one member that is a current UC Berkeley or UC San Francisco student, alumnus, faculty, or staff member. The event is organized by Haas students with support from the Lester Center for Entrepreneurship.

More Information on UC Berkeley Startup Competition Winners

Fisher Center’s Linda Algazzali Receives Chancellor’s Outstanding Staff Award

| by Pamela Tom

Linda Algazzali, a senior financial and project analyst at the Fisher Center for Real Estate and Urban Economics, received the Chancellor's Outstanding Staff Award today (April 29) for her extraordinary leadership during a challenging period last year.

In the 21st annual ceremony, Algazzali shook hands with Chancellor Robert Birgeneau during the 21st annual ceremony for the awards Monday afternoon. She was one of 14 staffers and members of six teams at UC Berkeley to receive the award, which recognize staff members who not only do an excellent job but demonstrate exceptional initiative in contributing to the campus community.

Algazzali was recognized for extraordinary leadership and adaptability in meeting multiple challenges resulting from the retirement, resignation, and loss of staff and faculty in 2011-2012. Her efforts were called "instrumental in getting the Fisher Center through a challenging period."

"Linda took on the responsibilities of multiple positions over our transition period and ensured that all of the needs of the Fisher Center were met," says Haas Professor Nancy Wallace, co-chair of the Fisher Center. "At the same time, she maintained a pleasant, optimistic, and constructive approach to the resulting changes."

More information about the Chancellor's Outstanding Staff Awards

Financial Engineering Graduate Dave Klein Wins Major Investment Research Award

| by Pamela Tom

Dave Klein, a 2006 graduate of the Berkeley Master of Financial Engineering Program, is the 2013 first-place winner of the prestigious National Association of Active Investment Managers (NAAIM) Wagner Award for Advances in Active Management for his paper “Equity Sector Rotation via Credit Relative Value.” 

The five-year-old Wagner Award is designed to expand awareness of active investment management techniques and the results of active strategies through the publication of research on active management versus buy-and-hold investing. As the winner, Klein will receive $10,000 and will present his results at the NAAIM’s annual conference in Denver, Colo.

Klein’s paper develops an investment strategy that rotates among sectors based on how the credit market and the stock market interact. The strategy pairs equity index exchange-traded funds (ETFs) with a high-yield credit index to make a tactical asset allocation decision (or one that actively adjusts a portfolio’s asset allocation) to outperform the benchmark while managing risk. The pairing of the index ETFs with a high-yield credit index is a fairly novel approach in the investment arena.

"The paper lays out an investment strategy that uses information from the credit market to make equity sector investment decisions, and the strategy uses the same information to do tactical asset allocation—to decide whether to be in equities or bonds," explains Klein. "We talk about how to rank sectors, and once we rank the sectors, we discuss how to decide whether to invest in the sector ETF or to invest in a bond ETF.”

After completing his MFE at Berkeley-Haas, Klein became a senior research analyst at Credit Derivatives Research and has been regularly interviewed by the media as a credit derivative market expert. Most recently, he became a partner and co-founder of Capital Context, a market strategy consultancy.  Capital Context offers individual investors a decision-making toolkit previously only available to sophisticated Wall Street and hedge fund investors. 

Prior to the MFE Program, Klein worked in the software industry for 14 years and has a mathematics background. "The MFE allowed me to combine my technical background with my quantitative interests and refocus my career more on the quantitative end than the technical end," he says. "The program gave me exposure and background in quantitative finance and allowed me to move into credit market research."

Alumni Weekend in London to Offer Innovative Perspectives on Leadership

| by Pamela Tom

Members of the Haas community will gather in London May 31 to June 2 for events with alumni, business and thought leaders, and Haas faculty who will provide new insights into successful leadership. The highlight of the weekend is a daylong symposium: “Reframe. Redefine. Rethink: Perspectives on Leadership & the Business World” on June 1 at Club Quarters, St. Paul’s.

To learn more about the London events and register, visit haas.berkeley.edu/groups/alumni/london.

Connson Chou Locke, PhD 08, a lecturer in management at the London School of Economics and Political Science and developer of the school’s organizational behavior core course, will discuss her research using social and cognitive psychology to analyze the complex power dynamic between managers and employees. She examines how communication styles, such as nonverbal behavior, affect perception, judgment, and conduct in workplace situations.

Paul Tiffany, PhD 83, a senior lecturer who’s taught strategic management at Haas since 1993, will present “Strategic Management in Transition: A New Paradigm?” He’ll discuss limitations of current models and offer a new approach to how leaders can best achieve competitive advantage. His work is based on the concept of Dynamic Capabilities pioneered by Haas Professor David Teece 15 years ago. The two are collaborating on a new book aimed at expanding the influence of Dynamic Capabilities.

Lecturer Rajiv Ball, who teaches in the Berkeley MBA for Executives and Executive Education programs, will lead an interactive session in which participants practice using empathy to build stronger professional and personal relationships.

Dean Rich Lyons, BS 82, will share how the Haas School’s mission and four Defining Principles differentiate Berkeley-Haas leaders and moderate a conversation with alumni from the fields of finance, consulting, and entertainment who are redefining how we do business.

Three gatherings will be highlights of the London weekend: a welcome reception on Friday, May 31, at Frog Capital near King’s Cross station; a networking dinner overlooking the Thames and the Tower of London on Saturday evening; and an intimate Sunday breakfast June 2 with Dean Rich Lyons at Club Quarters, St. Paul’s.