In new book, Prof. Vogel explores why California has a green streak

California was founded on the most environmentally destructive industry of the era: hydraulic gold mining. Meanwhile, loggers sought their own gold by harvesting the state’s ancient redwoods and sequoias. And oil companies struck black gold in rich on- and off-shore drilling sites.

Yet despite these powerful economic incentives to plunder the Golden State’s resources, California became the nation’s environmental leader—going out ahead to protect vast swaths of wilderness and coastline, adopt stringent emissions and energy efficiency standards, and enact the country’s most ambitious climate change regulation. It also became the richest state in the union.

“Things could just as easily have not turned out so well: the state could have been a paradise lost,” says Berkeley Haas Prof. Emeritus David Vogel.

In his new book, California Greenin’: How the Golden State Became an Environmental Leader, released this month by Princeton University Press, Vogel set out to answer a key question: “Why California? What is it about this state in particular that made it such an important regulatory innovator over so many years, in so many areas?”

A remarkable success story

His detailed account of the forces and feuds that shaped California’s environmental history is the first comprehensive look at California’s environmental leadership. It is, on balance, a remarkable success story. “California has often been on the verge of ecological, as well as economic, catastrophe, but it’s been resilient,” says Vogel. “Its environmental performance has been uneven and there are gaps, but California proves that you can combine environmental protection and economic growth.”

Prof. Emeritus David Vogel
Prof. Emeritus David Vogel

Vogel, an expert in international environmental regulation who has held a joint appointment at the Political Science Department and Haas, coined the term “the California effect” more than two decades ago to contrast with the regulatory race-to-the-bottom known as “the Delaware effect.” Vogel had noticed that other states and even countries had upped their environmental standards to meet trading partners’ requirements. For example, Germany had strengthened its auto emissions rules so that it could continue to export cars to California—its most important U.S. market.

Surprising business support

Though he had written extensively about the state’s regulatory history, Vogel said he was in for some surprises when he began delving more deeply into the reasons behind California’s green streak. Environmental wins are often cast as a triumph of citizens and regulators over business interests. But while grassroots and government forces have played a huge part in pushing for regulatory breakthroughs in the state, business support has been critical, he found.

“One of the things that was most striking to me was the importance of a politically divided business community, and how often some influential businesses found that they could benefit by protecting the state’s environmental quality,” says Vogel, the Soloman P. Lee Professor Emeritus of Business Ethics. “Without business backing, California regulatory laws would, without a doubt, be much weaker.”

In fact, one of the first victories for the state’s environment was the result of the rising power of the agricultural industry, rather than environmental activism. Hydraulic gold miners had choked the major waterways flowing from the Sierra with billions of cubic yards of debris. (At one point the Yuba River flowed 60 feet higher than in its pre-Gold Rush days, Vogel notes.) Sacramento Valley farmers, plagued by recurring flooding, sued the mining companies and ultimately won an 1884 ban on hydraulic mining—the first important environmental ruling issued by a federal court.

Wilderness allies

Half Dome_California Greenin' by David Vogel

Yosemite and the Sierra’s sequoias also had powerful business allies, Vogel points out. The Southern Pacific Railway and the Central American Steamship Transit Company recognized their value as tourist attractions. Thanks to the support of the steamship firms, Yosemite Valley and the Mariposa Grove became the country’s first federally protected wilderness in 1864, while lobbyists for the Southern Pacific played a critical role in persuading the federal government to expand the size of national parks in the Sierras.

Another example: As its infamous smog threatened to obscure Los Angeles’ glamour, the real estate community helped lead the fight for pollution controls. From the 1940s to the 1960s, L.A. led the nation in its research and enforcement against air pollution; in 1964, California passed the world’s first emissions standards for motor vehicle pollutants.

That led to the most influential example of the “California effect”. In a 1967 victory supported by an array of business interests, California won out over the Detroit auto industry and gained the right to enact its own automotive emission regulations, stricter than the federal government’s.  After other states were given the option of adopting either EPA standards or California standards, thirteen states, plus the District of Columbia, followed California’s lead, representing one-third of the U.S. car market. Nine other states later followed California’s zero emissions rules. In 2012, California’s tailpipe greenhouse gas emissions rules became the basis for the Obama Administration’s new national rules—rules that are now under attack by the Trump administration.

Creating new markets

Vogel devotes chapters to efforts to protect the land, the coast, water resources, and air quality, as well as improve energy efficiency and fight climate change. He also details the extent to which regulation has benefited business, even opening up entirely new industries. As he noted in a recent op-ed, “How California turned green into gold,” more than 200 individual firms and business associations backed the 2006 Global Warming Solutions Act, including Silicon Valley venture capitalists who had invested $2 billion in clean technology.

California is now the nation’s leader in solar energy, with half the country’s rooftop installations and a quarter of its jobs, and in electric vehicle adoption, with 200,000 EVs on the road‚ not to mention Tesla headquarters and other manufacturing facilities. Energy efficiency standards for homes and appliances have kept per-person energy use nearly flat in the state over the past 30 years, while it’s risen nearly 75 percent nationwide.

Vogel, who has lived in California since 1973 and dedicates the book to his twin native Californian grandsons, says the research was a personal eye-opener. “I wasn’t aware of the extent to which so much of what we now take for granted as California’s natural beauty is only here for us to enjoy because of those who backed stronger environmental regulations. We owe those firms and activists an enormous debt.”

Continued threats

He ultimately concludes that in addition to its geography, it was these repeated and high-profile threats to its beauty that set California on its path of environmental leadership. “A lot of other places in the world have beautiful and fragile environments, but few places were threatened so continuously by resource extraction and rapid economic and population growth—which would have destroyed all the things people loved about it,” he says.

Big challenges remain, he acknowledges, especially in transportation and water efficiency. Yet as the Trump administration roles back federal environmental regulations, California is more important than ever as a model for how states can lead the way on protecting their natural resources, he says.

David Vogel will discuss “California Greenin’” at 7pm, May 10, at Books Inc., 1491 Shattuck Ave, Berkeley. 

 

Assoc. Prof. Kolstad honored as top health economics researcher under 40

Assoc. Prof. Jonathan Kolstad_Berkeley Haas
Assoc. Prof. Jonathan Kolstad

Assoc. Prof. Jonathan Kolstad has received the top award from the American Society of Health Economists for researchers under age 40 who have made the most significant contributions to the field of health economics.

He shares the 2018 ASHEcon Medal with his collaborator, Assoc. Prof. Benjamin Handel of Berkeley’s Economics Department.

Kolstad said he’s honored to be recognized, relatively early in his career, for a larger contribution than just one paper, and for an ongoing collaboration.

“The fact that this was given jointly to Ben Handel and myself reflects an appreciation for some of the new avenues we’ve taken in health economics,” he said. “Much of our joint work has brought new data to bear on old problems that have really different implications when you get into how people actually behave, not just how we assume they behave. ”

Drawing on big data and behavioral economics

Kolstad’s research focuses on the intersection of health economics and public economics, and his work with Handel has also combined approaches from industrial organizations as well as behavioral economics. Their interdisciplinary, cross-departmental collaboration reflects the strength of health economics at UC Berkeley.

“We are very happy to have (Kolstad) at Haas, and we’re pleased by how he is helping to build interest in healthcare economics at Haas and across the Berkeley campus,” said Prof. Candi Yano, associate dean for academic affairs and chair of the faculty.

Recently, Kolstad and Handel have been working with a massive trove of health data on the entire population of the State of Utah over a long time period. The richness of the data has allowed them to analyze the different outcomes from different health insurers and health plans.

“We’re finding very large effects and big differences,” Kolstad said. “Simply changing insurers at the same employer—something most people encounter with some frequency—has huge effects not only on how much is spent on your health care, but also on how your healthcare is delivered.”

The researchers are now looking at what employers look for in choosing insurers and health plans, to answer the question of whether competition actually leads to “productive innovation”—i.e, improving care and lowering costs.

Data partnerships

Assoc. Prof. Benjamin Handel, Berkeley Economics
Assoc. Prof. Benjamin Handel, Berkeley Economics

Kolstad and Handel are also working on partnerships with a number of private companies, from digital health to employers and health care providers, to leverage their data for new research. “This is a particularly exciting area,” he says. “Collaboration between academics and private firms, particularly technology companies, is driving a lot of new findings. We hope to make similar strides on big health care questions.”

Since arriving at Haas from Wharton in 2015, Kolstad has brought his expertise with big data into the MBA curriculum, including developing a new “Big Data and Better Decisions” course that he co-taught with Prof. Paul Gertler this spring. Earlier this year, he was honored as a “40 Under 40” business leader by the San Francisco Business Times for his work as a cutting edge researcher, teacher, and entrepreneur. He founded a startup, Picwell, which now provides more than 1 million personalized insurance recommendations per year.

He said he’s excited by the practical applications of his academic work. “We all deal with our health, and the policies and products in the industry affect our everyday lives. The recognition for this work and its importance to the field will hopefully continue to push health economics more in this direction.”

The Opposite of Complacent: How Risky Businesses Avoid Disaster

This article is published jointly with Vanderbilt University’s Owen Graduate School of Management.

When a high-profile disaster occurs—from the BP Deepwater Horizon spill to Pacific Gas & Electric’s San Bruno pipeline explosion­—the public scramble for answers and accountability begins. Oftentimes, among the teams of investigators called in from law enforcement and government agencies, you’ll find organizational behavior experts Berkeley Haas Prof. Emeritus Karlene Roberts or Vanderbilt Owen’s Prof. Rangaraj Ramanujam.

Prof. Emeritus Karlene Roberts
Prof. Emeritus Karlene Roberts

That’s because about three decades ago, researchers at Berkeley pioneered a new way to understand man-made disasters, looking beyond human error and technical glitches to the organizational causes of catastrophes. Roberts was one of these trailblazers—her early aha moments came on Navy ships, where she observed a culture and systems that allowed for risky, technical work while minimizing errors.

A new field was born: the study of high reliability, and the practices that “highly reliable organizations” use to avoid disasters before they start. Researchers went on to apply this new lens to the study nuclear power plants, commercial aviation, utilities, the health care system, and other industries.

Roberts, chair of UC Berkeley’s Center for Catastrophic Risk Management, and Ramanujam, a leading researcher in the field who specializes in health care systems, decided it was time to take stock of the past 30 years of research. The new book they co-edited, “Organizing for Reliability – A Guide for Research and Practice,” was released last month.

We sat down with Roberts and Ramanujam to get a better understanding of the field, the special qualities of highly reliable organizations, and the work that has taken them to the aftermath of disasters around the world.

Prof. Rangaraj Ramanujam of Vanderbilt’s Owen School

Q: First off, what is a “highly reliable organization”?

KR: The original definition was an organization that operates in technically demanding conditions and prevents errors that lead to catastrophic consequences. My former Berkeley Haas dean, Ray Miles, once said to me, “High reliability is nothing but good management.” And I’d agree with that in part, but it’s good management in a particular direction. It’s not the same as saying “Our production was much higher this week.” It’s saying, “Our production levels are fine and we did it in a very safe manner.”

RR: There were originally two main features that make an organization highly reliable: It had an extended track record of avoiding errors and adverse outcomes, and it accomplished this despite operating in environments which were extremely challenging and where you’d have expected to see far more errors and adverse outcomes.

Q: How did this field get started?

KR: Accident research, as it was in those years, was mostly about slips, trips and falls. Those are things individuals do, and they’re usually linked to technological issues, such as stairs that weren’t built well, rather than any organizational process. This approach is different from that: if you see a really good thing in the organization going on consistently, then you have to look deep below the surface to see how that happens. You need to look at the individual embedded in the organization. How are pilots able to consistently land on aircraft carriers and rarely crash? That’s where I started off. You have to look into the culture, the decision-making, the communication, the training.

“If you see a really good thing in the organization going on consistently, then you have to look deep below the surface to see how that happens.” —Karlene Roberts

RR: There had been prior work which did look at an organizational approach to accidents, but without a doubt Karlene was one of the pioneers in drawing attention to the exceptional ability of some organizations to be so highly reliable for over such a long period of time.

Expanding the definition of Highly Reliable Organizations

Q: How this definition changed over time?

RR:  It continues to evolve and expand. The original focus was on reliability-attaining organizations, whereas it’s pretty clear right now most organizations are seeking reliability without always attaining it. The definition has also expanded beyond preventing major accidents to also include recovering effectively from accidents and shocks. More and more industries face a shrinking public tolerance for error and coming to terms with reliability as an imperative.

BH: Could you give a couple of examples of the most successful HROs, and some that are not?

KR: Commercial aviation, as an industry, has been successful. There have been accidents, yes, but you couldn’t sell airline tickets if planes kept dropping out of the sky. Ranga can speak to the healthcare industry—I think there’s minimal success there.

RR: I would say that healthcare as a whole cannot be characterized as a highly reliable organization, but there are pockets or islands of high reliability for sure. For example, anesthesiology has been ahead of the curve when it comes to minimizing harm from preventable errors. I study patient safety and medical errors, so people sometimes ask me, when they have a family member who is in the hospital for a serious procedure, “What should we do to make sure they are safe?” My answer is, “If you’re very concerned about the risks from a complicated procedure, that’s probably the part that is much better managed from a reliability viewpoint. Be much more alert to the seemingly simple parts of the post-op care such as medication administration and hand-wash compliance.” An especially frequent kind of medical error is the inability of the system to provide the right doses of the right drug to the right patient at the right time. The point here is you could have an organization with some parts that are highly reliable and some that are not. Reliability is highly local.

Q: That doesn’t give me a lot of confidence in the healthcare system. What sets these organizations apart from other organizations? What do they have in common?

Prof. Ramanujam teaching EMBA students.
Prof. Ramanujam teaching (Vanderbilt Photo / Daniel Dubois)

RR: Actually, healthcare has been one industry that has been especially receptive to new ideas for enhancing reliability, and therefore, patient safety. In fact, the edited volume has an entire chapter about reliability in healthcare.  So, the situation in healthcare in the U.S. is much more encouraging now.  As for your question about what is different or distinctive about highly reliable organizations, I’d first of all note they have an explicit organizational or team-level commitment to outcomes of reliability, such as safety. The second is they put a lot of emphasis on training and deliberately cultivating practices within teams so that they are continuously aware of the situation around them and very alert to the possibility of risk.

Mindful organizing

Q: One concept that’s highlighted in the book is “mindful organizing.” What is it?

RR: The idea of mindful organizing originated in the work that Karlene did with Karl Weick on board aircraft carriers, in what is a now classic paper in the field called “Collective Mind in Organizations: Heedful Interrelating on Flight Decks.” It’s a very highly cited and widely admired piece about what enables nuclear aircraft carrier operations to be highly reliable. In it, Karl and Karlene pointed to the quality of interactions among team members as an important part of the answer. Later on, Karl Weick and his colleague Kathy Sutcliffe have worked on—she wrote a chapter in our volume—have continued to formally study and refine the idea of mindful organizing. In essence, they have identified five distinct collective practices that constitute mindful organizing: a preoccupation with failure; a reluctance to simplify interpretations; sensitivity to operations—which means a good awareness of who knows what, in real time; commitment to resilience; and deference to expertise, rather than to authority. Karlene’s paper on “heedful interrelating” has a memorable example about deference to expertise.

Deference to expertise over authority

KR: I was just getting used to being aboard ships at the time, so this struck me. On aircraft carriers, planes land very rapidly. Unlike in commercial aviation where planes slow down to land, these guys speed up, because they’re going to get caught by the arresting gear. This pilot was coming in full steam ahead and suddenly the landing was called off. He pulled up and got out. Well, there was a kid on the deck who waved him off because he found a tool left on the deck. This was the lowest-level guy on the deck who called off the landing. What happened next is the air boss, who controls the aviation tower, shouts out over a loudspeaker to get this kid up to the tower quickly. I was thinking, “I’m going to get to witness this kid being drummed out of the Navy.” The 18-year-old shows up in the tower shaking, and I’m trying to be a fly on the wall watching the whole thing. The air boss congratulated him and told him he did a wonderful job, and he rewarded all the kid’s buddies on the deck as well. If that tool had gotten sucked up into an engine, it was going  to cause a pretty dramatic accident. The engine could have been destroyed, the plane could have crashed. If the enemy had been near, they would have taken advantage of it.

It was very powerful. I saw that stuff over and over and over again in the time I spent on Navy ships. And until I understood how the organization really worked I was surprised by it.  So that is one of the fundamentals that feed into the mindful organizing features: deference to the person who knows what is going on.

The importance of citizenship behaviors

Q: Wow, really interesting. Ranga, you’ve also talked about how the quality of social interactions affects the reliability of the outcomes.

RR: Yes, it takes lots of things for operations to be reliable. Clearly, technology matters a lot, design matters a lot, procedures matter a lot. But the reality is, even the best-designed technology, when put into operation, can produce situations which cannot be anticipated. Therefore, you depend on people to respond collectively rather than as individuals. If all everyone did was just to follow rules and comply with rules, lots of things will go wrong. As systems become more technologically complex, people must consistently go beyond the call of duty. That’s what we call citizenship behaviors, and people are much more likely to do it when they are part of a team because of team cohesion or motivation.

I did a study with a collaborator on patient safety in hospitals and the concept of silence—specifically the silence of nurses. Oftentimes frontline providers observe something that they think is unsafe or potentially harmful, but they choose not to speak because they think they have low status. And their inability to speak up can lead to a very bad outcome. Silence is not passive. This is a voluntary choice. We found that nurses were more likely to choose to remain silent if they feel their manager is unfair, procedurally. In this sense, a safe culture is also a fair culture.

KR: That’s why if I were to list the top predictors of reliability, I would put communication right at the very top of that kind of list. Open communication is extremely important.

RR: It’s communication in two ways. One is voluntary speaking of every individual in the system, and the other is communication within teams or amongst teams. Number two I would say is respectful interactions. I know it sounds very soft or fluffy, but I do really think that the extent to which people are respectful of one another in their interactions goes to the heart of the organization. And third is a clear commitment to reliability. It sounds very obvious, but I think most organizations or leaders take reliability for granted and think of it as something that folks at the lower levels of the operation do.

I know it sounds very soft or fluffy, but I do really think that the extent to which people are respectful of one another in their interactions goes to the heart of the organization. —Rangaraj Ramanujam

 

Why do we still have so many catastrophes?

Q: If we know these things about creating reliability, and organizations are spending a lot of money on it, why do we still have so many catastrophes?

KR: A simple answer is that people don’t implement all the things we tell them they should implement. I get called in on a lot of accidents, and all I have to do is look at it and say, “There it goes again.”

Q: What’s the “it” there?

KR: Well, it’s a lot of things and the same things over and over. Take PG&E in the San Bruno explosion, for example, there’s a long list: they didn’t have a good understanding of where their pipes were or what condition the pipes were in. Within the company, there was a lack of coordination and thought given to this issue. Then, if you look a little bit broader, they had never thought about or coordinated with the California Highway Patrol. It was rush hour when the accident happened, and they couldn’t get the cops and firetrucks up there quickly.

RR: Another thing is the scale of operations and the technology are getting more and more complex. It’s quite possible that, like the Red Queen says in Through the Looking Glass, that to stay in the same place you need to keep running. The growth and scale in technology is outpacing organizations’ ability to adopt these practices.

And one more important thing is a reality of life in corporate American today, where any efforts towards reliability happens in the context of escalating pressures for profits and speed. Even organizations that are aware of high-reliability principles might be subordinating reliability to profits and speed.

Increasing complexity

Q: Has technology made us safer?

KR: Yes and no.

RR: Exactly. Ultimately, we need a socio-technical system. The social and technical have to work in tandem.

KR: Very frequently they don’t. We have people right now looking at the Oroville Dam. The government report was written by engineers and no one else. But the problem on the face of that dam wasn’t just caused by engineers not taking into consideration weaknesses. The question is, why didn’t they take those things into consideration? I think it’s pretty clear that somehow the incentives weren’t there to do it. Now, they’re focusing on a large number of other dams where the problem may be the same. I’m glad I don’t live at the bottom of any of those dams.

RR: That’s true. I can think of several examples where technology has made things safer. One of the statistics I think doesn’t get as much respect as it should get is the decrease in car fatalities. There are certain models of cars, like Volvo, for example, where the fatalities are near zero for one or two-year periods. The problem is, even if technology is getting safer, that hasn’t stopped people from trying riskier and riskier things. As Karlene said, the challenge is ensuring that the social organization is keeping pace with the technological advances.

KR: It never does.

Beyond highly reliable organizations

Q: You said earlier you wouldn’t necessarily apply most of these principles to a regular organization that is not high risk. But can other organizations benefit from becoming more reliable?

RR: Earlier, Karlene started by talking about her former dean who told her that high reliability is really just good management. And I think that some of that is true, and some of the practices that HRO researchers brought to the surface are really practices or good communication, good coordination, situational awareness and responding to surprises. If you think about it in those general terms, you can see how those practices could enhance not just outcomes like reliability, but also outcomes such as innovation, speed, flexibility. There is some new research that is applying it in that way.

KR: I’d add a caveat that I don’t worry about this stuff in a mom-and-pop grocery store. Frustration or lack of communication is not likely to kill anybody there. We’re talking about organizations where reliability of outcome is really important. It’s an extraordinarily expensive thing for an organization to do, and you wouldn’t be able to put the money into it unless you were getting into very complex organizations.

 

 

 

Assoc. Prof. Patatoukas wins UC Berkeley’s most prestigious teaching award

Teaching award for Panos Patatoukas
Assoc. Prof. Panos Patatoukas laughs with students during one of his evening & weekend MBA classes.

Assoc. Prof. Panos Patatoukas has helped students find unexpected career paths in finance, launch companies, and open their eyes to the “intrigue, mischief, and opportunity boiling just below the surface of financial statements.”

For Patatoukas, it’s all in the service a larger purpose: democratizing access to financial information in the interest of a more equal society.

His passion, dedication, and instructional inventiveness have now earned Patatoukas UC Berkeley’s highest teaching honor. He is one of four professors across campus to receive a 2018 Distinguished Teaching Award, to be bestowed at a ceremony April 18.

Assoc. Prof. Panos Patatoukas wins Distinguished Teaching Award“This is a very significant event for me, and I feel very honored,” says Patatoukas, who joined the Haas Accounting Group eight years ago just after earning his PhD from Yale University. “My mom did not get to come to any of my graduations, but I’m bringing her over from Greece for this one.”

The award is given annually to recognize sustained excellence in teaching that “incites intellectual curiosity in students, engages them thoroughly in the enterprise of learning, and has a lifelong impact.”

Patatoukas teaches interdisciplinary capital markets courses to students in the Berkeley Haas PhD and Evening & Weekend MBA programs, including the elective Financial Information Analysis, which has become one of the most in-demand courses in the program since he took it over. Far from dry number crunching, the class wins high praise from students who come in with a wide range of financial literacy—from investment bankers to computer science or humanities majors.

“Panos has a particular genius for teaching financial information analysis to those of us unaccustomed to finance,” wrote Walker Frost, EWMBA 16, an undergraduate philosophy major who now manages finances for a 50-person company. “Panos is so successful because his goal is not just to teach finance—it is to use financial analysis tools to teach us about things we already intuit but can’t yet explain.”

Talent for teaching all levels

Patatoukas’ work spans all academic levels. He serves as PhD field advisor for the accounting group, overseeing student recruiting, curriculum, and comprehensive exams while also teaching seminars and participating in dissertation committees. He also serves as faculty director of Berkeley Executive Education’s Financial Analysis for Leaders program, which he completely overhauled; he mentors undergraduate Regent Fellows; and he has introduced high school students to the idea of saving and compounding through the Berkeley Business Academy for Youth.

“The driving force of my teaching is to mitigate the problem of access inequality to financial information, to promote individual investor protection, and improve the allocation of capital in society,” he wrote in his teaching reflection for the award. “My goal is to democratize the power of financial analysis, and to bring this power to our students across various programs at UC Berkeley.”

A native of Greece, Patatoukas was valedictorian at Athens University of Business and Economics, where he earned his bachelor’s in accounting and finance. He went on to earn a master’s at the London School of Economics before moving to the US to attend Yale. His research focuses on corporate valuation and financial statement analysis; the properties of financial accounting data and reporting practices; cross-industry economic links and value creation along the supply chain; and forecasting, “nowcasting,” and measuring economic activity using financial accounting data.

Making finance “a living, breathing landscape”

In his teaching, Patatoukas draws widely from accounting, finance, economics, and operations management, writing many of his own real-life, real-time cases and adeptly translating theory to practice. Teaching does not compete with his research, but rather his research informs his teaching and rewards him with new ideas—a few of which have grown into research papers, wrote Assoc. Dean Candi Yano and Sr. Asst. Dean Jay Stowsky in their nomination.

“I wish I had the opportunity to be a student at Berkeley, even though I do feel like a student of my students,” Patatoukas said. “I learn every day from them.”

One former MBA student wrote that with four years of experience investment banking, she had been initially skeptical that she would learn anything from an MBA course in financial information analysis. But from the very first day, she was hooked. She came away from the course with insights that have benefited her career but also impacted how she evaluates her personal financial decisions.

Students also praised Patatoukas for helping them develop in new careers. Patrick Rivers, EWMBA 16, said he took the course soon after​ switching tracks from 10 years as a research scientist to a​ dream job at a hedge fund, evaluating biotechnology investments. He said the course not only gave him a concrete way to evaluate investment opportunities and practical skills that made him “100% better” at his job, but he became genuinely excited about the world of finance.

“There was an entire world of intrigue, mischief, and opportunity boiling just below the surface of these financial statements, and I wanted to be as immersed as possible in that financial milieu. Panos made this a living, breathing landscape and not just a bunch of numbers on a page,” he wrote in his recommendation letter.

 

Patatoukas high-fives an MBA student.

Approachable mentor

Last fall, Patatoukas also took on the mentoring of three undergraduate Regent Fellows, including freshman David Lu, who wrote that he had felt overwhelmed and uncertain after changing his life-long dream of becoming a doctor and deciding to pursue business. Patatoukas is “the most approachable, kindhearted, charismatic and welcoming professor I have ever met,” and has been patient in describing career paths in business and the fundamentals of investing as well as the broader social implications of his work, he said.

“His goal of democratizing the power of financial information analysis and giving power to all people truly embodies the defining principles of Berkeley Haas,” Lu wrote. “He has proven to me, through his actions, that it is possible to have such altruistic and benevolent goals in the business field.”

Prof. Sunil Dutta, the Joan & Egon von Kaschnitz Distinguished Professor of Accounting and International Business and former chair of the accounting group, attributes Patatoukas’ exceptional teaching skills to his passion for his students and for his research, his ability to translate academic material to non-specialists, and his constant focus on improvement. “He studies each student’s feedback after the course and makes all the necessary changes to the content and teaching material based on this feedback. He is not satisfied even if there is a single student who has difficulty in following the material.”

He also makes himself available to students, guiding MBA independent study projects and mentoring graduate student instructors, noted Mike Rielly, CEO of Berkeley Executive Education and former assistant dean for the Berkeley MBA for Executives program. Rielly also called out Patatoukas’ “commitment to developing independent thinkers.”

Highly lauded teacher

The award comes on top of several other recognitions for Patatoukas’ teaching and research. He is a three-time winner of Berkeley Haas’ highest teaching honor, the Earl F. Cheit Award; he also won the school’s Schwabacher Award for Distinction in Teaching and Research and was the recipient of the 2017 AAA/AICPA Notable Contributions to Accounting Literature Award. He was also selected by Poets & Quants among the “2015 Best 40 Under 40 Professors“; by the San Francisco Business Times as part of the “40 under 40 Class of 2017,” and as a “Top 10 Business School Professor Under 40 by Fortune.

Past Berkeley Haas faculty winners of the Distinguished Teaching Award include:

  • Ulrike Malmendier (2015)
  • Teck-Hua Ho (2010)
  • Sara Beckman (2001)
  • Rich Lyons (1998)
  • David Modest (1992)
  • Earl Cheit (1989)
  • Frances Van Loo (1985);
  • Andrew Shogan (1979)
  • Richard Bagozzi (1978)

3 research-based ways to reduce unconscious gender bias in your organization

Insights from Prof. Jennifer Chatman, Prof. Don Moore, and Distinguished Teaching Fellow Kellie McElhaney

Research has long shown that companies with more women on their senior management teams see above-average financial returns.  But with a steady stream of news about workplace sexual harassment, the gender pay gap, and the small percentage of women at the top, it seems the business world has a long way to go in achieving gender equity.

Yet there are many research-proven strategies and practices that organizations can employ to reduce both overt and unconscious bias. For Women’s History Month, we highlight insights from three Berkeley Haas researchers on what organizations can do to reduce gender bias and create fair, equitable, and highly successful workplaces.

Make culture transparent

Political correctness has generally become a term of contempt, used to disparage a culture seen as stifling free expression—as when fired Google engineer James Damore railed against “PC-authoritarians.”

Berkeley Haas Prof. Jennifer Chatman_How to reduce gender bias
Prof. Jennifer Chatman

So Prof. Jennifer Chatman was surprised when she found, in a 2015 study, that mixed-gender groups who talked about rules of “political correctness” were significantly more creative than those who were simply told to be polite or sensitive.

“We were stunned by the results,” says Chatman, an expert on organizational culture who co-authored the study. “Those exposed to the PC norm had noticeably more divergent, novel, and interesting ideas than any of the other groups.”

Chatman’s study challenged both conventional wisdom and prior research on creativity, which presumes that imaginations flourish when constraints are removed. But in today’s diverse workplaces, uncertainty about how to act in mixed settings may actually inhibit creativity in other areas, the researchers concluded.

“Men are likely to worry about looking overbearing or sexist and fear social disapproval, while women concerned about whether their ideas will be accepted might self-censor,” Chatman says. “Spelling out the rules removes the ambiguity.”

For example, specifically stating that sexist language will not be tolerated reduces uncertainty, the researchers noted. In their experiments, the participants who discussed PC norms said they paid more attention to the words they used and tried to avoid offending other group members. Even with those self-restrictions, their groups came up with more ideas—and more innovative ideas—in a brainstorming session then those not given instructions.

“People can simultaneously be thoughtful, reasonable and respectful, while at the same time being wildly creative,” Chatman says.

To build a culture of respect, companies must clearly articulate their values and expected norms, and also be willing to enforce them, Chatman says. 

Make hiring transparent

When the London Symphony Orchestra noticed all their musicians were male, leaders realized gender bias had crept into their hiring. They started asking people to audition behind a screen and barefoot—so they wouldn’t unconsciously be influenced by the click-clack of high heels on the stage.

Berkeley Haas Prof. Don Moore
Prof. Don Moore

“Once they made that decision, they got better musicians and more female representation,” says Prof. Don Moore, an organizational behavior expert who studies decision making, overconfidence, and ethical choice.

Hiring and promoting the most capable people is critical to the success of any organization, yet many still rely on unstructured interviews that vary from person to person and introduce the probability of bias. “We’ve known for decades that interviews are terrible predictors of performance—it’s one of the best-established findings in organizational behavior research—yet somehow the word has not spread,” Moore says.

The simplest solution: Structure interviews so that all candidates are asked the same questions in the same order, and score the responses. Even better: use assessments of intelligence or other relevant skills to rate applicants in a quantifiable way, Moore says.

“It’s possible to get very well-designed tests that have been validated over many years and don’t include factors that we’d rather not consider, such as race, gender, or cultural background,” he says.

What about “fit”?

“I know that people believe they can assess ‘fit’, but when pushed as to what that means, most people have only the vaguest of responses: ‘Well, if I like them,'” Moore says. “But think about where your feelings of liking come from. Is it because the person looks like you? Talks like you? Went to the same schools? Without having a clear definition of ‘fit’ I worry that it opens the door to many prejudices that you don’t want influencing your decision.”

Even though it may be tough to create a perfectly non-biased hiring system, Moore says, “it’s a dream worth reaching for. It will make us better decision makers, it will make us better people, and it will pay dividends.”

Make pay practices transparent

On a national level, progress on closing the gender pay gap has been slow. Yet Gap Inc., proved it’s very much possible to achieve pay equity at the company level.

Adj. Assoc. Prof. Kellie McElhaney
Adj. Assoc. Prof. Kellie McElhaney

In 2014, Gap became the first Fortune 500 company to conduct a robust analysis and announce that it pays female and male employees equally for equal work, on average, across its global workforce of about 135,000. How did Gap do it? Distinguished Teaching Fellow Kellie McElhaney, founding director of the Berkeley Haas Center for Gender, Equity & Leadership, analyzed the company’s pay equity success in a case study published last July.

Gap has a strong history of strong women: It was co-founded by Doris and Don Fisher, who chipped in 50-50 to open their first store; it’s had senior women at the table from the start; and its workforce is 74 percent female. But that doesn’t mean gender parity was a fait accompli—in fact, female-dominated sectors such as retail, tend to have higher-than-average wage disparities since women tend to be clustered at the bottom, McElhaney notes.

Instead, the company’s equity success was the result of a concerted effort to engage and support women and help them rise through the ranks, through flexible work policies, and a culture that’s collaborative and inclusive. It’s also very much due to an intentional approach to minimize unconscious bias in pay, through transparency, accountability, and statistical analysis—practices other organizations can learn from.

Some best practices to make pay more transparent:

  • Create pay equity processes grounded in statistical analysis: Gap analyzed pay rates organization-wide and also by comparing comparable positions, grouping jobs based on responsibilities and experience required, and controlling for variables such as geography. Its analysis was validated externally.
  • Provide managers with data: The company gives managers pay data on their teams annually, including market ranges for each role. It also gives managers resources and discretion to correct pay differences.
  • Don’t require salary history: Women suffer a career-long wage loss when their salaries are anchored to prior inequities. Gap doesn’t require applicants to provide prior salary information during the initial hiring process (although it’s optional).
  • Put salary policies in writing: Gap publishes the company’s compensation practices on GapWeb, which all employees can access (they are not privy to specific pay ranges unless their managers share them).

In the case study, Keith White, Gap’s senior vice president of loss prevention, notes, “When operating eyes wide open, and not just treating people as if they are in a vacuum, [gender equality in pay] becomes a non-issue.”

How the “I approve” tagline boosts nasty political ads

I Approve This MessageWith primary season just around the corner, voters will soon start hearing a familiar refrain: “I’m Candidate X, and I approve this message.” Since 2002, federal law has required the tagline on all ads paid for by candidates for federal office.

The aim was to discourage negative campaigning. But newly published Berkeley Haas research shows that it’s actually made attack ads more powerful.

“People tend to be suspicious of political rhetoric—especially negative political rhetoric,” says Assoc. Prof. Clayton Critcher of the Haas Marketing Group. “But we found that the mandatory tagline has an unintended effect: It makes ads attacking an opponent’s policy positions seem more credible.”

Ironic effect

Assoc. Prof. Clayton Critcher

In a series of experiments, Critcher and co-researcher Minah Jung of New York University’s Stern School of Business found that adding the tagline to policy-based attack ads not only makes them more believable, but gives people a more positive view of the candidate who gives the tagline endorsement. Their paper, “How Encouraging Niceness Can Incentivize Nastiness: An Unintended Consequence of Advertising Reform,” was published this month in the Journal of Marketing Research.

“Although we think political consultants are not currently aware of this ironic effect, we clearly know regulators did not mean to help to legitimize negative and often misleading ads,” Critcher said.

As a psychologist who studies judgment and decision making, Critcher had long been curious about whether the ubiquitous taglines had any effect on voters. The “I approve this message” tagline originated with the “Stand by Your Ad” (SBYA) provision of the Bipartisan Campaign Reform Act of 2002, better known as McCain-Feingold.

“John McCain had this great speech from the Senate floor in which he said that candidates wouldn’t approve the trash their campaigns were putting out if they had to put their face on screen and stand behind it,” Critcher said. “We now know that despite the law, there has been no slowdown, and in fact an escalation, in negative political advertising.”

The percentage of negative ads swelled from 29 percent in 2000 to 64 percent in 2012, according to research cited in the paper. A CNN analysis found that in the week before the 2016 presidential election, a full 92 percent of ads were negative. While the rise of SuperPACs explains a lot of the growth in negativity, the candidates own messaging has grown more negative as well.

How do voters respond to “I approve”?

But rather than look at whether the mandatory tagline has encouraged politicians to change their messages, Critcher and Jung wanted to know whether it changes how voters respond to those messages—and if so, why.

Past research has found that negative ads can be more effective than positive ones, but campaigners who go negative face the added hurdle of overcoming voter skepticism. This hurdle is higher with character-based hit pieces, which voters may not see as relevant. Does someone’s affair or tax evasion penalty mean they will be a poor leader? In contrast, attacks on an opponent’s policy positions are clearly relevant to the job, but what undermines them are suspicions of their truthfulness. The researchers suspected the tagline might influence that.

The researchers experimented with real and fictional ads in video, audio, and print formats, conducting four experiments on about 2,000 people recruited from universities and Amazon’s Mechanical Turk. They used ads from Congressional races from 2006 to 2010, as well as fictional ads they created by editing together snippets from real advertisements.

They began by asking about 400 people to watch eight TV ads aired by Democratic and Republican candidates in recent Congressional races. In this set were positive and negative ads from each party focused on candidates’ character and policy record. Crucially, the researchers edited out the tagline on half of the ads each viewer saw.

What they found is that although the tagline did not consistently change people’s reaction to positive ads or ad hominem attacks, the tagline did give a clear boost to the policy-based attack ads. In addition, people had a more favorable view of candidates running negative ads when the tagline was included. The researchers found the same pattern in a second experiment using ads they wrote themselves, which allowed them to more precisely control for the ads’ content.

The effect was substantial: Across all their experiments, the researchers found that the tagline had an even stronger effect than did partisanship. “It may seem intuitive that Democrats and Republicans believe that Democrats and Republicans, respectively, run truer ads. It is remarkable that mandatory
endorsements can have effects that are at least as large,” they wrote in their paper.

Critcher cautioned, however, that the effect may sound exaggerated, because participants were not generally familiar with the candidates in the ads, and most ads, designed for broad appeal, don’t state candidates’ party affiliation. Still, given the closeness by which many races are decided, campaigns invest heavily in turnout operations that have much smaller effects, he noted.

Why the boost?

The researchers were also surprised when they began parsing out why the tagline works. Do voters not realize the tagline is simply required of all ads? Does it confuse them into thinking regulators have vetted the ads’ content?

They ran two more experiments with large sample sizes (639 people and 565 people) and found that even when participants were told the tagline was required by law, and that no regulators had vetted the content’s veracity, they still said the ads that included a tagline were more believable. Participants also were largely unaware of the tagline’s effect: Even those who said that it didn’t influence their evaluation of the ad were indeed influenced by it.

The researchers were able to invent brand new taglines (which they had voice actors deliver), attach them to ads, and tell participants that the law required candidates to deliver the tagline. They observed the same boost to ad credibility.

“We initially thought the boost came from what sounded like an implicit promise of the ads’ truthfulness—with the candidate putting themselves and their credibility on the line by affirming that they ‘approved’ the message,” Critcher said. “That was a factor, but the bigger effect was the fact that the ad had been touched by regulation. That gave a legitimating halo to the message as a whole.”

Critcher and Jung close their paper by considering whether the tagline should be ditched altogether. Although they didn’t find a perfect solution, they did find that a more neutral tagline—one that can’t be confused for an implicit promise of message truth value (e.g., “My name is X, and I am running for Y”) significantly decreased the unintended consequences.

“We hope that by bringing this to light, policymakers might realize this provision is not serving the public good and find a better way,” he said.

 

More research by Clayton Critcher:

Judging moral character: A matter of principle, not good deeds

 

 

 

Truth or consequences? The negative results of concealing who you really are on the job.