Faculty News| Page 5 of 32 | Haas News

Leo Helzel, MBA 68, longtime Haas supporter and first entrepreneurship teacher, passes away

April 1, 2019| by Haas News

Leo Helzel, MBA 68, LLM 70, an honored faculty member who guided the school’s first forays into entrepreneurship and was a dedicated and generous supporter of Haas for decades, passed away Thursday, March 21, in his home, surrounded by family. He was 101.

Helzel’s history at Haas includes a series of firsts. He taught the business school’s first entrepreneurship class—one of the first such courses offered at a U.S. business school. He was also the first chair of the Haas School Board, which advises the dean, and the first Haas instructor to be honored with an “adjunct professor emeritus” title upon retirement in recognition of his nearly forty years of service.

Helzel was instrumental in establishing the school’s entrepreneurship program. In addition to teaching, he provided the funding to endow the Leo B. and Florence Helzel Chair in Entrepreneurship and Innovation in 1986. He worked closely with then-Dean Richard Holton to create the business school’s Lester Center for Entrepreneurship and Innovation, which opened in 1991.

Helzel summarized his entrepreneurial verve and lifelong learnings—alongside wisdom from the CEOs of the Gap, Bank of America, and Williams-Sonoma—in his 1995 book, A Goal is a Dream with a Deadline: Extraordinary Wisdom for Entrepreneurs, Managers, and Other Smart People, and donated the proceeds to Haas.

“Leo was one of those people who changed the game whenever he was around, raising standards and pushing people to reach for more together,” said Professor and former Dean Rich Lyons, who worked closely with Helzel on the board and beyond. “He taught me a lot. It’s hard to imagine a stronger exemplar of our school’s defining leadership principles.”

*Helzel flew as a navigator on Navy planes during WWII.*

Helzel was born in New York City on November 1, 1917, to Philip and Hannah Helzel; he had two older siblings, Sylvia and Max. His parents had immigrated from Podhajce, a shtetl that was part of the Austro-Hungarian Empire, before World War I. He graduated from Townsend Harris, a tuition-free honors school for the City College of New York. He then worked full-time at his uncle’s accounting firm, Gerber & Landau, while attending ROTC and night classes at City College, graduating in 1938.

Called up to serve during World War II, Helzel flew as a navigator on Navy planes and served as a navigation flight instructor. His home base was the Alameda Naval Air Station, and after the war he stayed on in Oakland, launching several successful careers—as an accountant, a lawyer, and an entrepreneur.

In 1946, Helzel founded Leo B. Helzel & Company, now called the RINA Accountancy Corp., in Oakland. Aspiring to become a lawyer, Leo took night classes at Golden Gate University while also teaching tax and accounting there. In 1957, he decided he wanted to concentrate on law full time and left the firm as a partner, but remained as a client. He eventually took a risk on new technology for drilling oil wells and was successful in that arena as well.

Helzel began sharing the knowledge acquired during his multiple careers when he began teaching international business at Berkeley’s business school in 1967. While teaching, he decided to get an MBA, and upon completing the program at age 51 joked that he was “probably the oldest MBA in the books.” He went on to earn his Master of Laws (LLM) from Berkeley Law in 1970.

In 1970, Richard Holton, dean at the time and a friend of Helzel’s, came up with the idea of creating an entrepreneurship course and hired him to teach it. Helzel initially presented a case about a fictitious startup, Miracle Goggles. He later invited entrepreneurs whom he knew to share their stories with his class. Interest in the companies emerging in Silicon Valley was so intense that the course soon had to be moved to an auditorium. The course may have been the first to provide students with direct contact with successful entrepreneurs, according to Business at Berkeley by Sandra Epstein.

“Leo was a thought leader decades ahead of others in bringing real business practices and live case studies into the classroom from the time he began teaching here in 1967,” said his former student Jerry Weintraub, BS 80, MBA 88, and president of Weintraub Capital. “As a depression-era child who came from humble beginnings, Leo took immense pride in Haas—the opportunity this public institution gives to students and the impact education can have on improving the lives of others. Leo has left a legacy as an incredible agent of change in education, philanthropy, and the community through his mentorship and friendship to those of us lucky enough to have known him as a teacher.”

Members of the Helzel family: Florence; Larry, BA 68 (history); and Leo, MBA 68. — *Members of the Helzel family: Florence; Larry, BA 68 (history); and Leo, MBA 68*

Helzel also taught business law and commercial law at Haas, creating the course called Top Down Law with Adj. Prof. Noel Nellis, JD 66. The course taught business from the perspective of an entrepreneur who encounters legal problems.

“Leo was indeed a friend, mentor, and educational innovator. His leadership role in creating our entrepreneurship program is well known. More subtle perhaps, and one of his biggest innovations at Haas, was recruiting accomplished professionals to join our professional faculty,” said Jerome Engel, founding executive director emeritus of the Lester Center for Entrepreneurship and Helzel’s long-time faculty colleague. “We at Haas will benefit from his foresight, leadership, and generosity for generations. We will miss him. May his memory be a blessing to all of us.”

Helzel gave generously to the Haas School’s original campus that opened in 1995 and to its new building. In return, the Helzel Boardroom and a “Helzel Family” breakout room are named in his honor. He was also a Trustee for Golden Gate University and for the California College of the Arts, served on the board of BerkeleyLaw, and was active in several Bay Area nonprofit organizations.

He is survived by his loving family—his wife of 72 years, Florence; his two children and their spouses, Larry Helzel (Rebekah) and Deborah Kirshman (David); grandchildren Rachel Concannon (Jason) and Daniel Kirshman, MBA 2011 (Jennifer); great-grandchildren Riley and Jacob Concannon and Sienna and Skylar Kirshman; great-nephew Zachary Pine; and several other family members with whom he maintained close relationships.

A private family service has been held.

Contributions in Helzel’s memory may be made to the Magnes Collection of Jewish Art & Life, UC Berkeley, 2121 Allston Way, Berkeley, CA 94720-6300; givetocal.berkeley.edu/magnes.

Haas course inspires CityLab podcast on how tech is disrupting cities

February 26, 2019| by Laura Counts

When Molly Turner started as Airbnb’s first policy liaison back in 2011, most people in urban planning and government were still thinking of tech as an industry—rather than a force that was about to unleash a barrage of services and technologies that would disrupt the very fabric of city life.

Five years later, Turner took what she had learned on the front lines of this disruption to create the Berkeley Haas course on the topic, “Tech and the City: How to get urban innovation right.”

Berkeley Haas Lecturer Molly Turner — *Lecturer Molly Turner*

“I was both inspired and terrified by how much money was pouring into what I call ‘real-world tech startups,’ because I noticed that the entrepreneurs and the investors building them didn’t know very much about the cities they were disrupting,” says Turner, a lecturer in the Haas Business & Public Policy Group the whose background is in urban planning. “It felt like a very good time to go and teach the future tech leaders at the business school a little bit about cities.”

Now, Turner’s course has inspired a new podcast, “Technopolis,” produced by The Atlantic’s CityLab and which she co-hosts with Jim Kapsis, a Washington D.C.-based start-up advisor. The first eight-episode season launched today.

Remaking, disrupting, overrunning

Each episode is inspired by “a technology that is remaking, disrupting, or overrunning our cities in some way, good or bad,” Turner says. In some cases it’s a specific company, in others it’s a concept such as autonomous vehicles.

“We start by asking what we know about it right now, and then we bring in guests to broaden our thinking and ask the questions people aren’t asking about this stuff,” Turner says. “What could this mean for cities 50 years from now? What are some of the impacts that no one is planning for, and some of the unintended consequences, both good and bad? And what does it mean for our lives in cities, and how cities govern.”

The show’s guests come from some of the hottest tech companies and from city government, and also include academics and researchers who provide historical, philosophical, or futurist perspectives. The first season is sponsored by WeWork—though the company has nothing to do with the content, she says.

Turner says it was Kapsis, a friend who had served as a climate advisor in the Obama administration and with whom she often discussed these topics, who proposed the idea that they host a podcast together. So they pitched it to CityLab, “the best publication covering what’s going on in cities and what the future of cities look like,” she says. CityLab provides an editor-in-chief, seasoned radio producers, and access to the deep knowledge and connections of its reporting staff.

“It’s a true partnership,” she says.

From VC explosion to batteries and more

Episode 1 of Technopolis starts at the beginning, in a sense: it’s all about venture capital, and why tech investors are so interested in cities all of a sudden. They look at what that means for city leaders, and how the venture capital influx has transformed jobs as city halls.

The second episode covers autonomous vehicles, exploring some of the impacts no one is thinking about, while the third episode looks at batteries, and whether they may soon be turning buildings into mini power plants.

What about electric scooters? “Of course the scooters have home up—I think they’ve been mentioned several times in the first three episodes already, because they’re such a visible example for everyone in cities about how technology is changing our lives,” Turner says. While they haven’t devoted an episode entirely to scooters, Turner says they do explore the different tactics scooter companies and other startups are using to deal with city government.

“Is it better to ask for permission or beg for foregiveness? Companies are definitely trying both,” she says.

Listen or subscribe to Technopolis for free on Apple Podcasts, Stitcher, or Google.

Prof. Nancy Wallace wins prestigious Berkeley service award

February 7, 2019| by Haas News

Prof. Nancy Wallace has been honored with UC Berkeley’s prestigious 2019 Berkeley Faculty Service Award for making a lasting and significant impact—particularly by helping the campus navigate complex financial and real estate issues.

The award is bestowed by the Berkeley Division of the Academic Senate on faculty whose “outstanding and dedicated service to the campus, and whose activities as a faculty member have significantly enhanced the quality of the campus as an educational institution and community of scholars.”

Berkeley Haas Prof. Nancy Wallace — *Prof. Nancy Wallace*

Wallace, the Lisle and Roslyn Payne Chair in Real Estate Capital Markets and chair of the Haas Real Estate Group, shares the honor this year with Spanish Prof. Ignacio Navarrete of the Department of Spanish and Portuguese.

“During the past 10 years, Nancy has devoted extraordinary time and energy to the campus’s day-to-day well-being,” wrote Anthony Long, chair of the Academic Senate’s Committee on Faculty Awards and an emeritus professor of classics and literature.

Wallace, a prominent expert on the residential mortgage market, mortgage-related securities, and pricing models, helped the campus with a “series of onerous financial issues,” including the budget for intercollegiate athletics, advising on strategic banking relationships, and a sustainable funding model for the Lower Sproul Plaza redevelopment project.

In 2008, she was recruited by the UC Office of the President to serve on the Systemwide Committee on UC Faculty Mortgage Programs. She was also drafted to play a major role in the financial planning for Memorial Stadium, helping to deliver a blueprint for expanding the stadium’s uses.

Prof. Candi Yano, Haas Associate Dean for Academic Affairs and Chair of the Faculty, along with Prof. Richard Stanton wrote in a letter of support that in addition to her campus service, Wallace goes far beyond herself at Haas.

“Very few faculty are so committed to the campus that they are willing to invest long hours and their intellectual prowess in improving the financial stability of the campus. We note that Nancy is equally dedicated in her service to the Haas School, where she has served as Chair of the Real Estate group essentially ‘forever’,” they wrote.

In addition to her service on campus, Wallace has served on the Federal Reserve’s Model Validation Council and the U.S. Treasury’s Financial Research Advisory Committee.

Culture club: Top scholars and execs meet at Haas to discuss why culture counts

January 23, 2019| by Krysten Crawford

University of Maryland Prof. Michele Gelfand_Berkeley Haas Culture Conference — *Michele Gelfand, a University of Maryland psychology professor, presents on her work examining “tight” vs “loose” cultures at the inaugural Berkeley Haas Culture Conference*.

More than 100 senior business leaders and top scholars from around the world gathered at the Haas School last week to kick off the Berkeley Haas Culture Initiative, which will explore the role of culture and its impact in and across organizations.

The inaugural event was a two-day conference that brought together executives from Facebook, Netflix, Zappos, Pixar Animation Studios, Deloitte, Maersk, and other “culture-aware” companies with academics from a wide range of disciplines, including economics, anthropology, sociology, and psychology.

*Jennifer Chatman and Sameer Srivastava*

The initiative is the brainchild of Prof. Jennifer Chatman and Assoc. Prof. Sameer Srivastava of the Haas Management of Organizations Group, who aim to build a community of researchers and practitioners interested in how culture affects everything from hiring to promoting to the bottom line of corporate performance and strategic success.

“We invited a set of organizations that are already devoted to thinking about culture and asked them to explain the problems they are having on the ground, and we invited top academics to offer up a set of approaches to studying culture,” said Chatman. “What we are interested in is developing a shared research agenda to address some of the challenges we haven’t yet been able to solve.”

Launching the Berkeley Haas Culture Initiative

The Berkeley Haas Culture Conference was the first in what Chatman and Srivastava say will be an ongoing series of events, interdisciplinary research collaborations and industry partnerships, as well as communication exchanges on best practices. The idea was to start by taking stock of a field that has become increasing fragmented as it has expanded, Srivastava said.

“Economists study culture, psychologists study culture, and sociologists study culture—all in different ways,” Srivastava said. “At the same time, companies are developing innovative practices related to culture, and it’s often hard to disentangle what works and what doesn’t. We wanted to bring everyone together to start a conversation.”

Haas Dean Ann Harrison welcomed conference attendees by highlighting the school’s commitment to its own distinctive culture.

“You don’t have to be here very long to realize that we at Haas believe that our culture is what really sets us apart,” she said. “If we ask our students why they chose to come here, most say ‘We came here because of the culture.’ And they all refer to our Defining Leadership Principles.”

UC Berkeley at the center of organizational culture research

Attendees noted that UC Berkeley has long been a leader in the study of organizational culture. “It’s really appropriate to have a conference like this here at Berkeley,” said Michael Morris, a cross-cultural psychologist and professor of management at Columbia University. Much of the classic work on organizational culture and cultural sociology came out of the university, he said.

Chatman and Charles O’Reilly, a Haas professor emeritus now at the Stanford Graduate School of Business, are pioneers in the field (both are Haas PhD alumni). Influential work has also come out of Berkeley’s anthropology, sociology, and psychology departments. More than two dozen Berkeley faculty members—including a dozen from Haas—were among those in attendance at the conference.

Prof. Chatman presenting her work. — *Prof. Chatman presented on how to measure culture.*

New data, new methods

Over two days, more than 100 invited attendees tackled a breadth of issues around organizational culture. Academics described their latest research with an emphasis on how data and new research methods, such as using computational approaches and unobtrusive culture measures of culture, are opening up opportunities for companies to better understand how their overall culture—and subcultures within departments or teams—affect their organizations.

For example, researchers are analyzing words used in employee emails for signs of cultural fit among individuals. They can use apps to unobtrusively capture group conversations or obtain video from body cameras. They’re also looking at historical data, such as folklore in pre-industrial countries, to better understand modern social norms. Social media platforms such as Glassdoor, too, have become a rich source of data.

“What is amazing about the papers presented here—and what is very different from 20 years ago—is the quality of the research, the use of lab and field studies, the use of archival data and ethnographies, and the use of sophisticated measurement techniques,” O’Reilly said.

Challenges on the ground

*Bethany Brodsky of Netflix discussed the company’s distinctive culture.*

For their part, company speakers spoke candidly about the challenges around culture they are confronting as their businesses evolve, whether through mass hiring, mergers, new business strategies, or changes in leadership.

“Every time we add employees or a group of employees, our culture shifts,” said Inyong Kim, the vice president of employee experience at Adobe, who described how and why the company abolished formal performance reviews in favor of the “ongoing check-in.”

Ever-changing cultures was a theme echoed by others. For Deloitte, the question of how to transition a 150-year-old company for the future meant embracing “courage” as a key cultural value and embedding the attribute throughout the firm, said Jen Steinmann, Deloitte’s chief transformation officer. “Our three tenets of culture are the need to speak openly, support one another, and act boldly,” she said.

Bethany Brodsky, VP of talent for Netflix, talked about the enormous challenges that came with the company’s massive hiring spree after it launched simultaneously in more than 130 countries three years ago.

“When you have all these new people, how do you transmit [your] culture?” asked Brodsky. A word like “feedback,” she noted, doesn’t always translate. “It Russian, it translates closest to ‘criticism,’” she said.

Jennifer Cook, MBA 98 and the CEO of cancer detection startup Grail, said her experiences at six companies of varying sizes over 15 years have taught her that culture is a key leadership tool. “What I’ve realized in looking back is that there were any number of organizational themes and challenges that I had faced, and our teams had faced, for which culture was the relevant solution,” she said.

Seeds of a shared agenda

Bob Gibbons, a professor of organizational economics at MIT’s Sloan School of Management, said he is pleased that the culture initiative’s goals match his own agenda of nudging his field in an applied direction. In his case, that means addressing the question of “How can an economist help a fixed set of people collaborate better together?”

“People in the world know that culture is a thing and that it matters, and they are looking to us for help,” he said. “There’s an enormous academic opportunity, and it’s super important to do it across a whole bunch of disciplines that are represented in this room. I loved hearing that part.”

Founding sponsors of the Berkeley Haas Culture Initiative include Goldman Sachs, Adobe, Deloitte, Maersk, Spencer Stuart, and the UC Investments Office.

Prof. Severin Borenstein appointed to board overseeing California’s electric grid

January 23, 2019| by Haas News

Prof. Severin Borenstein has been appointed by Gov. Gavin Newsom to the board of the California Independent System Operator (CAISO), which oversees the state’s massive electric power system, transmission lines, and wholesale electricity market.

Borenstein is the E.T. Grether Professor of Business Administration and Public Policy at the Haas School and faculty director of the Energy Institute at Haas. He said he is honored by the appointment.

“This is an exciting time for the ISO as the industry develops approaches to reliably integrate renewable energy,” Borenstein said. “The board will have an important role facilitating opportunities for beneficial trade with the rest of the western market and continuing to support California’s climate goals.”

The California ISO is charged with ensuring that the state’s power grid—one of the largest and most modern in the world—operates reliably and transparently, and maintains an accessible wholesale energy market. The CAISO is a nonprofit public benefit corporation operating governed by a board of five members who serve staggered three-year terms.

<em>Severin Borenstein</em> — *Severin Borenstein*

An economics professor at Berkeley Haas since 1996, Borenstein’s recent research has focused on energy markets, including alternative models of retail electricity pricing, the impact of oil prices on gasoline markets, and the economics of renewable energy and climate change. He is also an outspoken, independent voice for climate change policies that are both efficient and are economically sound.

Borenstein has long been involved with California energy policy. He chaired the California Energy Commission’s Petroleum Market Advisory Committee from 2015 until it was dissolved in 2017. From 2012 to 2013, he served on the Emissions Market Assessment Committee, which advised the California Air Resources Board on the operation of California’s Cap and Trade market for greenhouse gases. He was a member of the Governing Board of the California Power Exchange from 1997 to 2003, and served on the California Attorney General’s gasoline price taskforce in 1999-2000.

Highly sought after as a media commentator, op-ed contributor, and blogger, Borenstein most recently discussed the implications of the Pacific Gas & Electric bankruptcy with more than a dozen news outlets, from the Financial Times to Bloomberg to KQED’s Forum. (Read his Berkeley News interview here.)

While the CAISO will not be directly involved in the PG&E bankruptcy, it will be required to ensure that the grid continues to operate seamlessly no matter which public or private utilities are in the mix. That includes preparing for changes wrought by climate change, and reliably integrating renewable power from wind and solar.

Borenstein’s appointment requires confirmation by the Senate.

Prof. Severin Borenstein: Lyft doesn’t cause congestion, all vehicles do

December 17, 2018| by Laura Counts

Real estate & economics forecast: a recession is on the horizon

November 21, 2018| by Laura Counts

Unemployment is at its lowest rate in 50 years, there are almost 7 million job openings nationwide, and consumer confidence is at its highest level in a decade. There’s more venture capital flowing than at any point since 2000, and commercial real estate loan origination is at its highest point ever. So, what could go wrong?

Lots, said Kenneth Rosen, faculty director for the Haas School’s Fisher Center for Real Estate & Urban Economics, who foresees a recession within the next 18 to 24 months.

“We’ve had a sugar high for the economy, and it will wear off,” said Rosen, delivering his annual forecast at the 41^st Annual Real Estate & Economics Symposium in San Francisco this week. “We’re in the last stages of a very good recovery, but we’re buying this time by spending a lot of money that we don’t have.”

Even so, Rosen does not foresee a crash in the real estate market anything like 2004 to 2007 or the late 1980s, and there’s still plenty of “dry powder”—or cash available for investment, he said. While real estate is overvalued compared to historical prices, it’s not overvalued compared to everything else, he said.

“This is not a very dramatic forecast, but the risks have risen dramatically and this is just the beginning of volatility,” he said. “There will be correction, and the Bay Area is likely to have a bigger correction than the rest of the country, because we’ve gone up so much.”

“A sledgehammer to break open a walnut”

Rosen pointed to rising interest rates, a ballooning national deficit, increasingly restrictive immigration policies in a tight labor market, and the escalating trade war with China as trouble signs. With $250 billion in tariffs imposed and $257 billion more threatened by President Trump, Chinese retaliation is to be expected.

“We certainly have problems with China, but tariffs are an exceptionally a blunt tool. It’s like using a sledgehammer to break open a walnut,” said Rosen, who is also chairman Rosen Consulting Group, a real estate market research firm. “No one wins in a trade war.”

The combined economic stimulus of tax cuts and increased spending has overheated the economy, and left few tools in policy makers’ arsenal to recover from the next recession, he said. A gridlocked Congress would not be able to pass a spending increase bill, or another tax cut. “In a full employment economy, the deficit should be zero or positive, so we should be at a balanced budget today. We’re doing the opposite. We’re not going to be ready for the next big downturn.”

While he had plenty of critiques of President Trump and his administration, he said Congress is also at fault. “There are no fiscal hawks any more. There’s no one who believes in balanced budgets.”

Red-hot economy

In the immediate future, however, the economy remains red hot. There’s a boom in job creation nationwide, especially throughout the West. California as a whole is a bit lower than the rest of the region, but it still had 1.9 percent growth in job creation year-over-year. Unemployment in San Francisco hovers just over 2 percent.

“The tech cities are going strong: Seattle, Austin, Silicon Valley, Denver, San Francisco, and Oakland are still very strong. The only thing constraining these places is the fact that housing is so expensive that they can’t get people to come. We’d be growing faster if we can solve some of those issues.”

Real estate forecast

Nationwide, retail is still struggling while industrial properties are hot, with vacancy rates at their lowest point since the 80s. “It’s a red-hot sector because of e-commerce, which is driving the demand for this space and bypassing retail network.”

In terms of commercial real estate, Rosen predicts cap rates—or the rates of return on commercial property—are expected to rise after historic lows. He warned the crowd of 300 real estate and finance professionals in the room to not be too smug. “We’ve had big periods of appreciation in the last decade because cap rates went down. Don’t think it’s because you’re smart—it’s because they repressed interest rates. It’s going to reverse. We’ll have headwinds.”

His advice? “As a lender, I’d say now’s the time to be cautious. Don’t lend to inexperienced people. You’ve got to be able to hold through the next six years—don’t think you’re going to miss this recession,” he said. “As an investor, it’s now is the time harvest or hedge, don’t wait for the next cycle.”

Nationally there’s strong demand for office space, but it’s nothing like previous booms. And vacancy rates have stopped going down because businesses need less space per worker—thanks to open floor plans and co-working spaces.

“The WeWorks of the world are 50 percent more dense than traditional office spaces,” he said.

Although the rental market peaked several years ago and home ownership is creeping back up, rental vacancy rates are low. The proportion of young adults living with their parents has begun to drop from a high of 32 percent in 2016. In the Bay Area, apartment vacancy rates are below 4 percent, and rents are rising again after appearing to top out.

California—a victim of its own success?

California homes have become increasingly unaffordable–just 30 percent of people can afford a median priced home, compared with 50 percent nationally. In the Bay Area, prices were up almost 10 percent year-over-year in September. Recently, however, there are signs that home prices may be beginning to drop—whether it’s due to rising interest rates or people leaving the region.

All this leads Rosen to believe California may soon be a victim of its own success.

“We may be the cause of our own demise. With high housing prices and congestion, people are going to move elsewhere,” he said. “You’ve seen reports that up to a third of people are thinking of relocating in the next five years. Add to that the higher taxes that we keep on voting on ourselves, and I think we could be in a situation where we’ve hit our peak moment and it’s just a question of how fast we can slow down.”

Prof. Andrew Rose named as dean of the National University of Singapore

November 6, 2018| by Laura Counts

Prof. Andrew Rose, an expert in international finance, trade, and economics who has worked with the World Bank, U.S. treasury department, and central banks in 14 countries around the world, has been appointed dean of the National University of Singapore (NUS).

Rose will be on duty at Haas through spring 2019 before taking the helm of NUS on June 1.

“I’m going to miss Berkeley—I’ve been here since before it was Haas,” said Rose, referring to the school’s name change in 1989. “But I’m looking forward to the challenge of leading a school in Asia.”

Rose, who holds Bernard T Rocca Jr. Chair of International Business & Trade in the Economic Analysis and Policy Group, has taught and conducted research at Berkeley Haas since 1986, serving as associate dean of academic affairs and chair of the faculty from 2010 to 2016.

Rose is a prolific and highly cited researcher whose work focuses on currency and exchange rates, as well as economic crises. He has collaborated with former Federal Reserve Chair and Berkeley Haas Prof. Emeritus Janet Yellen, as well as UC Berkeley Nobel Laureate George Akerlof.

A Canadian native who holds triple citizenship in his home country, the U.S., and the U.K., Rose has worked as an advisor to numerous economic agencies, including the International Monetary Fund and the Asian Development Bank. He has worked with the central banks of England, Canada, Europe, Japan, Singapore, and the U.S., among others.

He has also been a visiting scholar at a dozen schools, including NUS. He served as founding director of the NUS Risk Management Institute and worked with others to help organize the Asian Bureau of Financial and Economic Research.

At Haas, Rose formerly chaired the Economic Analysis & Policy Group and served as founding director of the Clausen Center for International Business & Policy. He has been honored for his teaching and extensive service to the school. He won the won the Cheit Award for Excellence in Teaching in 1999 and 2011 and received the Williamson Award—the school’s highest faculty honor—in 2016-2017.

Solomon Darwin’s new books explore the Smart Village movement

September 12, 2018| by Krysten Crawford

Solomon Darwin, the executive director of the Garwood Center for Corporate Innovation, has just published two new books, The Road to Mori: Smart Villages of Tomorrow and The Untouchables: Three Generations of Triumph Over Torment.

The first book is a case study about the modernization efforts underway in his hometown of Mori, a village of 8,000 people in southeastern India; the second is a memoir of how three generations of his family overcame their status as members of India’s lowest caste. We recently spoke to him about both efforts.

Q: How would you describe the Smart Villages movement, and Mori’s role in it?

A: Smart Villages are not about building infrastructure, roads, buildings, water tanks, and public toilets. They are about empowering people with digital technologies so they can access global markets. They are about using the concept of open innovation that my friend and colleague Henry Chesbrough pioneered to share ideas that build ecosystems where everyone benefits. In early 2016, the Garwood Center, UC Berkeley, and Mori’s regional government partnered to build a scalable prototype of a smart village in Mori. I think of Mori as more of an idea, or a mindset, than a place.

Q: In your books, you tell two very powerful, closely related stories. Why now?

*Solomon Darwin has written two new books about India: a memoir and a book about Smart Villages.*

A: One book actually inspired the other. We’ve accomplished enough in Mori that I wanted to share our successes and lessons and help corporate executives understand that 3.4 billion poor people are a big market opportunity. As I was writing that story, I got inspired to write about my family. I was born in Mori as an Untouchable, which is the lowest social caste in India and usually means a life of extreme hardship. But my grandmother was very entrepreneurial and built a number of thriving global businesses without the benefit of technology. My father also rose above the narrow constraints of our caste to earn a PhD in biology and become an American university professor. As a teenager, I went to college in the U.S. with the equivalent of a fifth-grade education. This is a story I’ve long been encouraged to tell, and there are echoes of my family’s struggles and successes in what’s happening in Mori.

Q: What is happening in Mori, and how is technology changing villagers’ lives?

A: The Mori Smart Village started with Internet connectivity. We just marked the two-year anniversary of the day that I, literally, flipped the switch that brought Internet access to every home. The good news is, people were streaming YouTube videos live, buying goods, and transferring money within an hour. The bad news is there isn’t enough bandwidth to handle all of the traffic. We’re working to fix that. We knew people were hungry for the Internet, but we didn’t realize they were starving for it.

Today, we have 22 corporate partners from around the world, including Google, PayPal, Ericsson, Dell-EMC, Wipro, Hella, and Hitachi bringing services to Mori. PayPal, for example, has developed the Digital Mall, where residents can open a bank account and get paid for their work when selling online. Before, there was no easy way to use a bank, but now a simple digital and mobile solution is beginning to create a thriving economy.

Q: Are there other important lessons?

A: I’m discovering that startups have a big role to play. Large companies tend to be more reluctant to adapt their technologies and business model to the rural emerging markets. Startups can move faster and they have very progressive products and services that have a great match for the villagers, like New Sun Road, a company founded by two Berkeley graduates that is working to bring electricity and the Internet to remote villages. My team just wrote a proposal to India’s Prime Minister Narenda Modi encouraging his government to invest in startups.

Q: You write a lot about the importance of using Smart Villages to make villagers happier, not just better off financially.

A: Mori had one of the highest suicide rates among farmers in India. Since the farmers don’t own their land, they are slaves to their landlords. They are also debtors to the companies that sell them seeds, fertilizer, pesticides, and water. If companies, instead of working in silos and squeezing farmers, can work together as one ecosystem and create one distribution channel, they benefit and the farmers benefit. Costs are eliminated, time is saved, and speed-to-market improves. The farmer is happier. The Smart Village movement is raising the happiness index—not just raising standards of living.

Q: What’s next for Smart Villages?

A: We’re working to bring the Smart Village concept to 455 villages in the state of Andhra Pradesh, which is where Mori is, and to another state near the Himalayas. We’re still in experimental stages of figuring out what works and what doesn’t. But there are 650,000 villages in India. To scale this, we just started working with several companies to develop a publicly available online platform where villagers, researchers, startups, global firms, government entities, and entrepreneurs come together to develop digital solutions. This process provides an open innovation process to test and scale solutions co-innovated by the whole ecosystem. The process also allows many half-baked technologies to completion that empowers people. The data-rich Smart Village platform will help generate new insights to posted challenges to solve them rapidly in a cost-effective and affordable fashion.

Nine universities, including Berkeley, MIT, Oxford, Cambridge, and Aachen, have just signed up to participate, along with 80 corporations.

Cryptocurrency demystified: A Q&A with Prof. Christine Parlour

September 10, 2018| by Sam Zuckerman

The surge of bitcoin brought cryptocurrencies from tech-nerd toy to household name, and they’re increasingly showing up in investment portfolios. Yet it’s still a mystery to most people how these digital currencies work. Are they even currency? And do they belong in an everyday person’s portfolio?

Haas News posed these questions to Prof. Christine Parlour, a leading scholar of financial markets and the banking system. In the past few years, Parlour has focused on how digital technologies, including new electronic payment methods like PayPal, are transforming the financial system and affecting the stability of banks. She taught a pioneering fintech course at Haas in 2015, and she is now organizing a new FinTech Center, which will be a hub for research on emerging financial technologies.

Recently, Parlour has given close attention to the value of bitcoin and other cryptocurrencies, a burning question in the world of finance. In a working paper, she analyzed market pricing on 222 digital coins and examined the initial coin offering market. Parlour, who holds the Sylvan C. Coleman Chair in Finance and Accounting at Berkeley Haas, shared some of her thoughts on the burgeoning cryptocurrency market.

Berkeley Haas Prof. Christine Parlour — Prof. Christine Parlour

Q: Many people have heard of bitcoin and other cryptocurrencies, but not many really understand what they are. So, what exactly are cryptocurrencies?

A: Essentially, they’re digital codes that give people the ability to consume and use services. As such, they can be traded and so they do have some sort of transfer-of-value characteristics.

Q: Do they meet the classic economic definition of money—that is, a medium of exchange, a unit of accounting, and a store of value?

A: Despite the great alliterative mouth-feel of “cryptocurrency,” they’re not really currency. Perhaps a more accurate designation would be “cryptocoupons.”

Turning cryptos into cash

Q: Whether they’re cryptocoupons or cryptocurrencies, what can they be used for?

A: Most cryptocurrencies essentially have a use-value associated with a specific underlying commodity or service. For example, sometimes they’re used as a way to compensate artists who are providing their intellectual property. Sometimes they’re used to compensate people who are providing some of their cloud storage capacity to other vendors. So, it’s pretty much anything that you can think of. I’ve even seen marketing specialists and influencers being paid with cryptocurrencies.

Q: Suppose the artist who is paid with cryptocurrency wants cold cash. How can he or she turn the cryptocurrency into conventional money?

A: There are many different exchanges that allow you to convert cryptocurrencies to U.S. dollars or whatever currency you prefer. So, you can switch them out for cash.

New asset class

Q: They’re often described as a new asset class. What’s distinctive about cryptocurrencies as an asset?

A: From a finance point of view, there are lots of things that we view as being assets. And the only thing we care about is that we can use them to get money. I can buy these claims and then, at some point, I can cash the claims back into dollar bills. Hopefully, my money, my piles of dollar bills, will have grown. So inasmuch as you can convert any of these cryptocurrencies to fiat money and back again, you can essentially view them as an asset class.

“Despite the great alliterative mouth-feel of ‘cryptocurrency,’ they’re not really currency.”

Q: Do they have any advantages as an addition to an investment portfolio?

A: What’s interesting about them from a portfolio construction point of view is they essentially add an element of diversification to the standard assets that most people have in their 401(k) plans.

Cryptocurrency mining on the monitor of an office computer. — *Cryptocurrency mining*

Overvalued or undervalued

Q: Bitcoin and other cryptocurrencies have been among the fastest appreciating assets on record. What has driven the phenomenal increases—and subsequent price plunges?

A: That question presupposes that we know exactly why prices move, but the fact is we don’t. You might as well ask why people like Pokémon Go. I hate to get metaphysical, but essentially there are sometimes things that capture the popular imagination and people just view them as being valuable.

Q: But the market price of bitcoin isn’t metaphysical. It’s real, which raises the question of why it moved the way it did.

A: Why do we have the valuations we currently have in the stock market? People will pontificate about growth rates and outlooks, but they really have no idea.

Q: The price appreciation of bitcoin and other cryptocurrencies has drawn a lot of attention, but how can we determine their value as opposed to their price?

A: I don’t really think that’s a question that should be posed to somebody in finance.

Q: Why?

A: Well, what is the value of a Treasury bond? I can tell you what the price is and I can tell you how much I can convert it into U.S. dollars tomorrow. But the value is not clear. So, instead of asking about value, we look at changes in wealth in terms of U.S. dollars and you can certainly do that for cryptocurrencies.

Q: Do you have a personal opinion about whether cryptocurrencies are overvalued or undervalued?

A: The thing I feel very comfortable saying is that there are diversification properties associated with having some cryptocurrencies in your portfolio. We know that the returns are pretty much driven by something that’s independent of the standard things we put in portfolios. A well-diversified portfolio should have a little bit of exposure to crypto.

Buyer beware

Q: Wouldn’t it be reasonable for investors to be skittish, given the price volatility of these assets and the lack of regulation of the marketplace?

A: Yes, absolutely. But we have a lot of attempts to start up exchange-traded funds that track cryptos and these are under the usual regulatory umbrellas.

“ICOs are basically created in the febrile brain of the underlying inventor of the coin. It’s just all over the map. They’re fundamentally unregulated and the asset that’s issued doesn’t necessarily bear any resemblance to a security.”

Q: Isn’t there a concern about buying at the top of the market or buying into a heavily speculative market?

A: Yeah, but you can say the same thing about people who bought condominiums in San Francisco.

Q: I want to ask about the related area of initial coin offerings (ICOs). How does an ICO, which gives investors digital coins or tokens, differ from a standard initial public offering in which the investor gets stock providing an ownership claim in the issuing enterprise?

A: ICOs sound like IPOs linguistically, but they’re very, very different. ICOs are basically created in the febrile brain of the underlying inventor of the coin. It’s just all over the map. They’re fundamentally unregulated and the asset that’s issued doesn’t necessarily bear any resemblance to a security. If you are a smaller investor, I would say “caveat emptor,” capitalized, in italics and bold, underlined with stars around it. Basically, only buy a new coin after it has appeared on one of the crypto exchanges—or after the SEC moves forward with more oversight.

“Public sector entrepreneurs” from around the globe gather at Haas to strategize

August 31, 2018| by Laura Counts

In Afghanistan, where fake or “ghost” workers siphon off government paychecks and some rural teachers get paid through bursars who carry bags of cash to remote areas, can mobile money reduce corruption in public payrolls?

In Sierra Leone, where just 10 percent of households own a TV and opposition parties are weak, can screenings of videotaped candidate debates at large public gatherings help increase voter knowledge and improve candidates’ accountability?

Of these and the myriad efforts to reform public institutions in the developing world, which ones are proving to be most effective?

That was the central question occupying the researchers, funders, and “public sector entrepreneurs” from across the globe who gathered at the Haas School this week to share knowledge and strategies on how to achieve positive institutional change in developing nations.

Prof. Ernesto Dal Bó gives opening remarks at the EDI conference — *Prof. Ernesto Dal Bó opened the conference. (Photo credit: CEGA)*

Professors Ernesto Dal Bó and Frederico Finan, both from the Business and Public Policy group at Haas, convened the three-day forum as part of the Economic Development and Institutions (EDI) initiative, a five-year, $19 million international effort funded by UK Aid from the UK Department for International Development and managed by Oxford Policy Management. The professors, working with Berkeley’s Center for Effective Global Action (CEGA), are overseeing $5.5 million in randomized control trials of institutional reform efforts throughout the world in order to build on what works.

Public sector entrepreneurs

The forum brought together the people behind these evidence-based reforms to share progress and challenges, spark new research, and build connections. Visitors include high-level officials from the Mexico City Labor Court, the Judiciary of Kenya Law Reform Commission, the Uganda Ministry of Lands, Housing and Urban Development, Pakistan’s Punjab Commission on the Status of Women, the City of Dakar tax authority, and others.

“Over a number of years here at Berkeley we have been devoted to the study of the institutional roots of economic development,” Dal Bó said in his opening remarks. “We have learned that when you scratch beneath the surface, you find that behind every successful institutional reform project is an individual who, in some part of a public organization, decided that he or she had had enough and that something needed to change. In every single case there is a figure that we like to call a ‘public sector entrepreneur,’ who is somehow combining resources to make something happen.”

*Judiciary of Kenya Deputy Director Paul Kimalu asks a question during a session. (Photo credit: CEGA)*

30 studies underway

Launched two years ago, the EDI initiative has already allocated allocated $5.5 million in funding to 30 randomized control studies involving 80 researchers across 12 countries, Dal Bó said. They include academics, research institutions, and reform-minded public organizations working to increase government transparency, accountability, and other reforms to political and legal systems.

Randomized control trials are considered the gold standard in field research, reducing bias and providing data on which reforms actually make a difference. EDI is focusing on programs that work closely with local institutions and government, rather than efforts by outside groups alone that may be less sustainable. While there are many initiatives funding impact evaluations in the developing world, EDI has a broader goal, Dal Bó said.

“We want to go beyond the individual impact evaluations and create linkages to build more cohesive, generalizable knowledge,” said Dal Bó, the Philips Girgich Professor of Business and an expert on government corruption and reform, who holds a joint appointment in the Political Science Department. “The other thing we want to do is put the lens on these public sector entrepreneurs and endow these people with instruments that might be helpful.”

Researchers and public sector reformers from around the world gathered at Berkeley Haas. — *Researchers, funders, and public sector entrepreneurs from across the globe gathered at Haas to strategize about their work. (Photo credit: CEGA)*

Frontiers of evidence-based policy

The forum included interactive sessions with leaders of the studies that are underway, discussions about the state of science and open policy questions, funding priorities, and presentations from the “frontiers of evidence-based policy.” Two of the presenters were professors Katherine Casey of Stanford’s Graduate School of Business, who conducted the study of citizen engagement and election reforms in Sierra Leone, and Michael Callen of UC San Diego’s Rady School of Management, who led the experiment on using mobile money to fight corruption in Afghanistan (which was not funded by EDI but presented as an example of a large-scale public sector experiment).

Callen worked with the Afghan Ministries of Finance, Labor, and Education and the Office of the President to register all workers and then test whether paying them through mobile money would reduce the substantial “leakage” of government funds. The program was successful enough that Office of the President and the Ministry of Finance are bringing it to scale with the goal of paying all public employees using mobile money.

“The evidence-based smart policy movement is creating innovations at a remarkable pace,” he said. “But for something like this to succeed it needs to be anchored in government so that innovators can hand it over to implementers.”

Asst. Prof. Frederico Finan presents his research — *Asst. Prof. Frederico Finan presented research that found mobile phones improved performance of agricultural agents in Paraguay. (Photo credit: CEGA)*

Dal Bó and Finan, who act as the scientific leads for EDI’s randomized control trial program, also presented on their own research on reform efforts in Mexico and Paraguay. Their experiments (not funded by EDI) showed how financial rewards, and mobile technology, can help with the recruiting and monitoring of frontline public service workers. In one study, they rolled out mobile phones to the government agents who support small-scale farmers in Paraguay. They found the phones improved their performance, allowing them to not only document their farm visits but also for their government supervisors to track and monitor their locations.

The EDI program also includes research that takes stock the evidence on specific issues, development of a new diagnostic tool, and in-depth case studies. Other partners include Belgium’s University of Namur, the Paris School of Economics, and consulting firm Aide a la Decision Economique.

Meet the faculty: Haas welcomes three rising academic stars

August 20, 2018| by Laura Counts

Three new assistant professors have joined the Berkeley Haas faculty, with research interests that range from how financial news influences markets to the unintended consequences of mortgage market regulations to developing more accurate ways to predict consumer behavior.

Anastassia Fedyk and Matteo Benetton will join the Finance Group, while Giovanni Compiani will be part of the Marketing Group.

“We’re thrilled to have these three rising stars join us this year,” said Prof. Candace Yano, associate dean for academic affairs and chair of the faculty.

The three new faculty members have already won awards for their research and have published in top journals. As is customary, they will spend the fall semester working on their research and plan to begin teaching in the spring semester.

Assistant Professor Anastassia Fedyk, Finance

Berkeley Haas Asst. Prof. Anastassia Fedyk — *Asst. Prof. Anastassia Fedyk*

For Anastassia Fedyk, coming to Haas is a homecoming of sorts. Though she was born in Ukraine and moved to the United States at age 10, she spent her high school years in Berkeley while her mother earned her PhD in accounting at Haas.

“I really loved living here back in high school, so it was always a dream to move back,” says Fedyk. “And the fact that there are so many people here working in behavioral economics makes it a perfect fit with my work.”

Knowing early on that she wanted to become a research economist, Fedyk majored in math at Princeton and did a two-year stint doing research at Goldman Sachs before heading to Harvard University to earn her PhD in business economics.

Her work spans finance and behavioral economics, and she has pursued three main research threads so far. The first focuses on financial news and how it translates into prices and trading volume in the markets. She’s looked at trading around news events and how the news is presented. “For example, if the news is printed on the front page that will prompt a much faster price response than if it’s less prominent,” she said. Or, when two old news stories are reprinted together, they are perceived as a new piece of information.

Her second line of research centers on present bias and procrastination. She’s found that although people fail to recognize these tendencies in themselves—and really do believe they’ll follow through on their plans for a new gym routine or diet—they easily recognize them in others.

Fedyk’s third line of inquiry looks at how employees’ skills relate to companies’ performance, working with a large dataset of resumes from a startup that collects public profiles. She has found that companies with an unusually high focus on sales-oriented skills tend to outperform, while companies that are heavy on administrative and bureaucratic personnel tend to do worse.

She will be teaching core finance in the evening & weekend MBA program.

Assistant Professor Matteo Benetton, Finance

Berkeley Haas Asst. Prof. Matteo Benetton — *Asst. Prof. Matteo Benetton*

Matteo Benetton also feels a kinship with Berkeley, although he had only spent three days here interviewing before moving 5,500 miles this month from the U.K, where he completed his PhD at the London School of Economics.

“The vast majority of Italian economists study at Bocconi, which is a private university, but I went to the University of Pisa’s Sant’Anna School of Advanced Studies, which is public,” said Benetton, who originally hails from Treviso near Venice. “I love the idea of a high-quality public university, and the research mindset that goes with that. That’s something I value a lot. Plus, after six years in London I’m looking forward to some sunshine.”

Benetton, whose work centers on the intersection between competition in the lending market, mortgage product design, and regulation, says he was excited to find so many faculty at Haas who share his interests, both in the Finance and Real Estate groups.

Benetton’s research has shown that some banking regulations put in place after the global financial crisis have had unintended consequences, giving more advantages to big banks over smaller banks. “The regulation can actually distort competition, and increase market concentration,” he said. In one paper, Benetton recommended that regulations apply evenly to big banks and smaller lenders, to prevent established banks from gaining additional advantages.

He has also researched how innovative mortgage product design can benefit consumers and prevent the buildup of risk in the housing market. He’s looked at shared-equity mortgages, in which a government or bank lender provides a homebuyer with part of the down payment but takes some of the equity. These profit-sharing contracts can reduce risk, but homebuyers who expect prices to go up tend to avoid the since they don’t want to share the gains.

While much of his work has been focused on Europe, with his new proximity to Silicon Valley Benetton says he’s interested in exploring how fintech is changing banking and payment systems, as well as branching out into household finance.

Benetton will be finishing up a research project this fall and will begin teaching finance in the undergraduate program in January.

Assistant Professor Giovanni Compiani, Marketing

Berkeley Haas Asst. Prof. Giovanni Compiani — *Asst. Prof. Giovanni Compiani*

Giovanni Compiani is also a native of Italy, who comes to Haas via Yale University, where he earned a PhD in economics. He’s looking forward to opportunities for working across disciplines at Berkeley, and also to the proximity to Silicon Valley and its trove of consumer data.

“Being at a business school and at Berkeley in particular, there’s a more question-oriented approach—rather than a focus on methods it’s about ‘What real-world question do we want to address?’”, Compiani said. “At Yale, I acquired a rich set of econometrics and structural methods tools which I now look forward to applying. There are so many relevant topics in the digital economy, and at Berkeley an economist can work with a computer scientist and say something very meaningful and interesting.”

Compiani grew up in Bologna before studying economics at Italy’s prestigious Bocconi University in Milan. He completed part of his master’s at Yale and returned for his doctorate.

He has focused much of his research so far on consumer behavior, building a model that gives more flexibility than established models allow for in predicting consumer reactions to price changes. “Let’s say a tax is levied on a supermarket. The market could lower the price of products to keep the final price to consumers unchanged, or they could pass on the full increase to consumers. The best strategy depends on knowing how consumers react,” he said. “This model relaxes certain strict assumptions typically made for ease of programming, and thus delivers more robust results.”

Compiani is also investigating patterns of how consumers search across different product characteristics, such as price. “Understanding these patterns has implications both for policy and for firm strategy,” he said.

With the possibility of increased access to data sources from Silicon Valley companies, Compiani is interested in exploring new lines of research on how concerns about data privacy influence consumer behavior.

He will begin teaching marketing analytics in the undergraduate program in the spring.

Outstanding paper award for Prof. Laura Kray’s article on women as negotiators

July 31, 2018| by Haas News

An article by Prof. Laura Kray aimed at rewriting the narrative on woman as negotiators and leaders has received a 2018 “Outstanding Practitioner-Oriented Publication” award from the Academy of Management (AOM), a professional association that publishes several academic journals.

Kray’s article, “Changing the Narrative: Women as Negotiators – and Leaders” was published in the Fall 2017 issue of California Management Review, the Berkeley Haas journal that serves as a bridge between those who study management and those who practice it.

Practical strategies for managers

The article, co-written with Jessica Kennedy of Vanderbilt University, explores the challenges that women face in rising through the ranks and achieving equal pay. Kray and Kennedy contend that the stereotype of women as innately poor advocates for themselves distracts from the fact that women possess unique advantages as negotiators. In fact, Kray’s past research has shown that women tend to be both more cooperative and more ethical than men in negotiations. The article presents practical strategies for managers and negotiators of both genders to close existing performance gaps.

“Only when women are given the credit they deserve will we bridge the gender divide,” they write.

The article was selected by a committee from the Academy of Management’s Organizational Behavior (OB) Division. “[Kray’s research] shines a light on a very timely topic as the conversation around women is changing in many parts of the world. Moreover, it represents one of the few articles that attempt to arm organizations with solutions to the challenges around a perceived gender gap. Rather than focusing on how men and women are different (and how one should be more like the other to fit a situation), it focuses on how we may want to change how we look at certain practices or competencies. That is, it advocates to change the practice rather than change the person,” the judges wrote.

Kray and Kennedy will accept the award at the Academy of Management Conference in Chicago on August 11.

Kray is Warren E. and Carol Spieker Professor of Leadership at Berkeley Haas, and one of the founding researchers for the new Center for Equity, Gender, and Leadership. She is also the founding director of the Women’s Executive Leadership Program for Berkeley Executive Education.

California Management Review special issue

As part of California Management Review’s 60^th anniversary special issue, Kray’s research was featured alongside six other contributions from Berkeley Haas faculty authors. Other articles included research on personnel selection by Prof. Don Moore, language as a window into culture by Assoc. Prof. Sameer Srivastava, overclaiming by Asst. Prof. Juliana Schroeder, cross-sector careers by Adj. Prof. Nora Silver, and sustainability at Patagonia by Robert Strand, executive director of the Center for Responsible Business.

In big data course, MBA students learn how to second-guess an AI

June 20, 2018| by Krysten Crawford

Berkeley MBA students listen intently in the "Big Data, Better Decisions" course. — *MBA students listen intently during a session of the new “Big Data, Better Decisions” course.* | Copyright Noah Berger 2018

“Classified” is a series spotlighting some of the more powerful lessons faculty are teaching in Haas classrooms.

On a recent spring morning, the future of business education was on full display in Connie & Kevin Chou Hall on the Haas School of Business campus. Standing before a 5th-floor classroom packed with aspiring MBAs, Assoc. Prof. Jonathan Kolstad was talking advanced data science as part of his new course, “Big Data and Better Decisions.”

Kolstad asked students to pick between two common models for designing a predictive algorithm. “Tell me a situation where you would want to use a regression tree over a linear regression,” said Kolstad. A student spoke up: “When you’re using Facebook likes to analyze Metallica fans versus people who like to eat hamburgers.”

“Nice,” said Kolstad. “You can reach a subtler conclusion by using a tree that puts hamburger ‘likes’ and Metallica ‘likes’ together—you can see when a combination of these factors matters, rather than looking at each one alone.”

*Assoc. Prof Jonathan Kolstad immerses himself in his teaching.* | Copyright Noah Berger, 2018

If ever there was a moment that captured how far business education has come from its 19th century roots, this was it. With data now pervasive across company operations—from marketing and sales to human resources and finance—there’s a demand for business managers and leaders who know a lot more than the basics. Companies are embracing data-driven machine learning to forecast everything from consumer behavior to worker productivity. They’re also relying more on randomized trials, a process long associated with medicine, to test sales promotions or advertising campaigns before they launch.

“There’s a growing need within companies for MBAs trained in data analytics,” says Prof. Paul Gertler, an economist who is co-teaching the course. “This class is designed to prepare students to be part of the modern labor force and leaders of industry.”

New breed of data-driven MBAs

Kolstad and Gertler aren’t looking to train data scientists. Their goal is to enable MBAs to bring a question-the-status-quo mindset to data-driven initiatives within their organizations—whether they are themselves part of a data team, managing one, or tasked as a C-suite leader with setting strategy based on what the numbers suggest. Students learn to blend business strategy with new tools from machine learning.

Yet equipping students with the right data skills means one thing: delving into the nitty-gritty of data analytics—even if, as Gertler says “they never touch another piece of data in their lives.”

“This isn’t a theory course,” said Gertler, who is the Li Ka Shing Professor at Haas with a joint appointment at the UC Berkeley School of Public Health. “This is a get-your-hands-dirty-up-to-your-elbows-in-data course.”

This meant, among other things, requiring students to learn a programming language called R, which is popular for data mining. They also had to complete a prerequisite, “Data and Decisions,” and a core statistics course.

“This isn’t a theory course. This is a get-your-hands-dirty-up-to-your-elbows-in-data course.” —Prof. Paul Gertler

To be sure, this hands-on approach made the class a stretch for students without experience in big data analytics—but also made it particularly rewarding for those who pushed through the technical challenges.

Laura Andersen, MBA 19, appreciated that the course was the real deal. She says data is changing the game in her chosen field of social services, but non-profits and government agencies often lack the resources to take full advantage of it.

“I need to know the vocabulary and to be able to pull some of the best practices around data from the private sector,” says Anderson, who plans to learn more by tapping into university-wide resources like UC Berkeley’s D-Lab, which offers classes and other services that support data-intensive research in social sciences. “This class has been a great investment, and experiencing it on a campus with some of the best academic resources in the world on these topics has been a great way to get started.”

Causation + prediction

*Prof. Paul Gertler, center, joins students in listening to a course session.* | Copyright Noah Berger, 2018

Led by Gertler, the first months of the class were devoted to the growing use of randomized trials in business and different tests for finding causation—a critical step in data analysis. “Businesses are no longer saying, ‘Let’s try this and see whether we feel like it worked or not,'” says Gertler, who is also the scientific director at the UC Berkeley Center for Effective Global Action. “They want hard evidence, not only that a strategy worked but also by how much.”

To that end, students learned how one randomized trial showed that buyer discounts drove car sales faster than boosting incentives for sales teams. They studied how eBay ran a series of random experiments to test its Google advertising and found zero upside to running ads alongside brand-specific searches. In a third case study, generic drug makers called off a planned $5 million marketing campaign after a randomized trial showed it would have no effect on its target audience: physicians prescribing brand-name drugs.

“Randomized trials are as much about finding what doesn’t work—the counterfactual—as it is about finding what does,” Gertler told the class. “That’s the dirty little secret about data analysis.”

How to 2nd-guess an AI

For Kolstad, who taught the machine learning portion of the class, a key theme was the “black box.” As artificial intelligence has grown, so, too, have instances where an algorithm makes accurate predictions yet nobody really understands why. For example, a program could know that a certain consumer will click on an ad, but the “black box” means it can’t tell whether that’s because the online user was young and female or liked Metallica and hamburgers.

“Analytics consultants often come to the C-suite and say, ‘We have these fancy models that predict really well,'” said Kolstad, who also co-directs the health initiative at the UC Berkeley Opportunity Lab and is co-founder of Philadelphia startup Picwell, which provides personalized insurance recommendations.

“Now that you understand what’s really behind these models, you know the right questions to ask,” Kolstad tells students. “You can say, ‘I don’t care just about predictive performance. I want to know my customers better.’ And you can ask, ‘How did you avoid ‘overfitting’ the data? Did you leave data out? Can I provide data of my own for you to test?’”

Students like KC Loder, MBA/MPH 18, signed up for the class because they, too, recognize that advanced data analytics is a must-have skill for today’s business leaders. Before coming to Haas, he worked in health care and saw firsthand how hospitals and other providers leverage data to keep costs down and improve patient care.

“Whether you’re working in health care or education or big tech, if you are the strategic thinker and you can’t understand what good data science is and what the data scientists on your team are doing, then you’re going to be obsolete,” says Loder.

*Prof. Paul Gertler speaks with a student after class.* | Noah Berger, 2018

Dean Lyons receives The Consortium’s Sterling H. Schoen Award

June 14, 2018| by Haas News

Dean Rich Lyons has been honored by The Consortium for the Graduate Study in Management for his commitment to advancing opportunity and access to higher education for underrepresented minorities.

The annual Sterling H. Schoen Achievement Award, created in 2001 in honor of Consortium founder Sterling H. Schoen, a professor at Washington University, was presented at a reception held yesterday in Orlando, Florida.

The award acknowledges Lyons’ leadership in working with The Consortium, an alliance of top U.S. business schools and corporations aimed at fostering diversity among graduate business students and corporate leaders.

“We are so appreciative of The Consortium as a partner in helping us to create a more diverse student body and mindset at Haas,” Lyons said. “There are a great many people at Haas who have helped in our work with The Consortium and deserve to share in this award—especially our students, who have gone beyond themselves in taking on leadership roles that have had profound impact on our community.”

Lyons led Berkeley Haas to rejoin the consortium in 2010 after a seven-year hiatus following the passage of California Proposition 209, which prohibits public institutions from engaging in affirmative action programs. The school had withdrawn from the organization in 2003.

After The Consortium expanded its mission to support students who demonstrate a commitment to advancing diversity and inclusion, regardless of their race or national origin, Lyons worked closely with others at Haas to help bring the school back in.

In the first year after returning to the consortium, applications from underrepresented minorities jumped 44 percent, and the number of underrepresented minority students enrolled has increased.

The school continues to sharpen its commitment to being more representative and inclusive—one very recent example being the stronger diversity statement posted in multiple places on the Haas website.

Nobel achiever: How Prof. Oliver Williamson revolutionized how economists look at organizations

January 15, 2010|By Ronna Kelly

Oliver Williamson, a professor with an unconventional approach to research and a yen for welding metal sculpture, revolutionized the way economists look at organizations.

For the past several years, Haas School Professor Emeritus Oliver Williamson had been on the so-called “short list” to receive the Nobel Prize in Economics.

So, when his son, Oliver Williamson Jr., visited in October, Williamson asked him to please answer the phone if it were to ring early in the morning of Oct. 12. Sure enough, Williamson and his son heard the phone at 3:30 a.m. Williamson Jr. jumped out of bed, picking it up on the second ring. After a Scandinavian voice asked for Professor Williamson, he told his father, “Dad, I think this is the call!”

Then Williamson’s life changed forever. The first reporter arrived at his Berkeley hills home before sunrise, kicking off a day full of nonstop interviews and celebrations until Williamson returned home for dinner 15 hours later. Within two days, his inbox was flooded with hundreds of congratulatory emails from people he did and didn’t know. Six weeks later, Williamson was off to Washington, DC, to join the other 2009 American Nobel winners to meet President Obama — an annual White House tradition. Then he was off to Europe for more festivities —
first a conference in Oslo in his honor, followed by “Nobel Week” in Stockholm. The award ceremony on Dec. 10 at the Stockholm Concert Hall was followed by the Nobel Banquet at the Stockholm City Hall, where Williamson was seated with Sweden’s Princess Madeleine, and his wife, Dolores, was seated with the ambassador from Great Britain.

It’s been more than a whirlwind, Williamson, 77, says after returning to Berkeley. “More like a typhoon.”

“But,” he adds with a grin, “how can I complain?”

Essence of business enterprise

Journalists speculated Williamson received the Nobel in 2009 because of his work’s applications to the economic crisis and financial regulation, but those who know Williamson as “Olly” — colleagues and past students — say he was long overdue to receive the most prestigious prize in economics. Haas School Professor David Teece declared Williamson would win the Nobel Prize in 1974 after reading Williamson’s third book, Markets and Hierarchies (1975). Teece read a draft manuscript while earning his PhD at the University of Pennsylvania, where Williamson was a professor at the time.

“I returned to his office three days later and reported, ‘This is a great book. Why has it taken me four years at Penn to discover a framework that addresses deep questions about the business firm and its organization?’” recalls Teece, noting that before Williamson, the economic frameworks and models to understand the business enterprise were “quite frankly pathetic.”

“Oliver outlined a conceptually elegant new framework for thinking about the very essence of business enterprise — how it is structured internally and how managers can invent new business organizations,” Teece explains. “Secondly, he outlined what he called a ‘discriminating alignment framework’ for helping us think through how firms should choose what to do inside and what to do outside — the outsourcing decision we currently think of.”
Williamson’s research was path-breaking in part because he analyzed the firm through a more interdisciplinary lens than his peers. “The connective tissue between the departments at Berkeley is really part of the DNA here. In the same way, Oliver Williamson’s work is not only profound but spans so much intellectual space,” says Dean Rich Lyons. “When we start thinking about firms and how managers do their work, there are members of our faculty who think not only of the formal organization of the firm but also the culture and social norms. Olly was spanning both of those areas very, very early on. The Nobel prize couldn’t have gone to a more wonderful person.”

To make or to buy?

The Royal Swedish Academy of Sciences said it awarded the Nobel to Williamson “for his analysis of economic governance, especially the boundaries of the firm.” (Williamson shared the prize with Elinor Ostrom of Indiana University.) In the simplest terms, those boundaries refer to when a firm decides whether to outsource a process, service, or manufacturing function or perform it in-house — the “make-or-buy” decision.

But that understates Williamson’s contribution: Building on a paper written in 1937 by Ronald Coase, also a Nobel laureate, Williamson pioneered a new way of analyzing business enterprises, through the lens of transaction cost economics, in which he explored how variations among transaction attributes warrant one structure of organization rather than another. Because his analysis has been so methodical, detailed, and thorough, Williamson and hundreds of others have been able to apply his framework to many situations and enterprises beyond just the firm and its outsourcing decision.

“I originally thought of make-or-buy as a stand-alone problem,” Williamson explains. “But now I think of it as being an exemplar. If you understand make-or-buy, which is a simple case, you can understand more complex cases.”

Those more complex cases include joint ventures and decisions on industry privatization, labor contracts, antitrust, and regulation. Williamson, for instance, has applied his framework to evaluate cable TV franchises and antitrust enforcement for vertically integrated firms.

Williamson spawned a huge new wave of empirical literature testing his framework in a wide range of industries, from aerospace to semiconductors — an estimated 800 empirical studies, according to a 2006 survey done by his students. Indeed, Williamson’s work has impacted such diverse fields as public policy, law, strategy, and sociology. Markets and Hierarchies and his subsequent book, The Economic Institutions of Capitalism: Firms, Markets, Relational Contracting (1985), are among the most cited books in the social sciences.

Midwest roots

Williamson himself is similarly multi-faceted — a hard-working, demanding, and deep-thinking academic with a dry wit who enjoys welding metal sculpture in his spare time and spending summers with his wife and family (five now-grown children plus spouses and grandchildren) at their summer home on Lake Nebagamon in Wisconsin.

Williamson was born in Superior, Wisconsin, the son of two teachers, raised with an inquisitive mind and the assumption that he would go to college. “I had originally thought of becoming a lawyer, but I was attracted to math and science in high school and began talking instead of becoming an engineer,” Williamson recalls in his fifth book, The Mechanisms of Governance (1996).

Williamson spent two years at Ripon College in Wisconsin and three years at MIT, where he studied engineering and management. After graduating, he worked as a project engineer for the US government in Washington, DC — an experience that gave him an appreciation for the real workings of bureaucracy. He then earned an MBA at Stanford in 1960 and transferred to the Carnegie Institute of Technology (now Carnegie-Mellon) to earn his PhD in economics in 1963. Williamson calls his PhD training “by far the most important event in my intellectual development.”

“Carnegie was an incredible place,” he says. “It had a lot of Young Turks, right at the height of their research powers. You walked in the door, you took a deep breath, and you just knew that this place was committed to leading-edge research, and you picked up the enthusiasm and a sense that you, too, could start doing things.”

Those Young Turks included future Nobel laureates Herbert Simon, Franco Modigliani, Merton Miller, and Robert Lucas, a roster to which their students Edward Prescott, Finn Kydland, and Williamson have since been added. Carnegie’s highly interdisciplinary approach would go on to influence how Williamson combined law, economics, and organization to explore the boundaries of the firm through the lens of transaction cost economics and develop a more realistic, behavioral view of the firm and its participants.

Berkeley and back

After earning his PhD, Williamson landed his first job in academia at Berkeley. But his request for tenure was denied. “It was presumptuous of me,” Williamson says now of his Berkeley bid for tenure, chuckling at his youthful hubris while sitting in his modest Haas School office. “I mean, I’d only been here a year and three months.”

Williamson went on to take a position in 1965 at the University of Pennsylvania, where he stayed until 1983, when he moved to Yale. In 1988, Teece and Al Fishlow, now a professor emeritus at Columbia University, helped woo Williamson back to Berkeley, which appealed to Williamson’s interdisciplinary tendencies by offering him appointments in not only business and economics but also law.

While at Berkeley, Williamson created a world-renowned PhD workshop on institutional analysis (now renamed the Williamson Seminar on Institutional Analysis).

“It was a fantastic window on research on institutions and organizations across a broad range of disciplines,” says Rotman Associate Professor Joanne Oxley, who earned her PhD under Williamson at Haas in 1995. “Lots of very famous or soon-to-be famous professors came through.”

“Olly also would invite a couple of PhD students along to dinner with the speaker after the workshop,” recalls Oxley. “That is unique in my experience of faculty seminars and says a lot about his commitment to his students.”

Williamson speaks just as positively about his Berkeley students.

“We get pleasure from the good students that
we have, and the good colleagues that we have, and the wonderful surroundings of which we are a part,” Williamson says.

“Berkeley is a glorious place,” he adds. “Everywhere you turn you find this commitment to excellence.”

Indeed, Williamson demonstrated his strong affection for Berkeley by deciding to give a large portion of his Nobel prize money to Haas to help create a new endowed faculty chair in the economics of organization.

“Another thing about Berkeley is the extraordinary energy that this place communicates,” Williamson says. “You can’t step onto this campus and not pick it up.”

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

May 1, 2018| by Laura Counts

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.”

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

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.

John Harsanyi Wins Nobel Economic Prize

October 15, 1994| by Haas News

Haas economist John Harsanyi, who taught at the business school from 1964-1990, shares this year’s Nobel Prize in economics with John Nash, Princeton, and Reinhard Selten, Bonn-Germany, for their contributions to game theory.

Ever played a card game and wondered if there was a way to predict its outcome? You are not alone. Social scientists ponder similar questions. The mystery of unraveling what may happen next, of being able to foresee a piece of the future, if you will, has intrigued humans since the dawn of civilization.

Mathematician John von Neumann and economist Oskar Morgenstern broke the first ground on this subject when they designed models for fairly controlled environments: two participants who have all the information about the rules of the game and about their opponent. The result of their findings, Theory of Games and Economic Behavior, published 50 years ago, became the foundation for the study of game theory.

New milestones in the development of modern game theory soon followed. John Nash discovered that in all games there are equilibria when their participants pursue their best possible strategies in light of what the others are doing. John Harsanyi expanded on Nash with a model for games in which participants don’t have all the information about their opponents – thereby making game theory a practical tool for real-life competitions and negotiations.

After Harsanyi had published his new model in the 1960s, it took fellow economists years to start implementing his findings. On October 11 at 4:30 a.m., however, proof that Harsanyi’s ideas had fully penetrated mainstream economics came in the form of a phone call from Sweden, announcing that he was one of three winners of the Nobel Prize. Fellow game theorists John Nash of Princeton University and Reinhard Selten of Bonn, Germany, who distinguished among different kinds of equilibria, share the award and the $933,000 prize with the Berkeley scholar.

“I was very pleased about the award because it’s the first Nobel Prize in economics awarded for work in game theory,” says Harsanyi. “I am also very pleased for the other two recipients. It so happens that I met both of them at a conference on game theory at Princeton in 1962 and have the highest possible respond for their work.”

Analyzing Real Life

Game theory is a mathematical model of human behavior that analyzes how people make decisions in competitive situations such as gambling, bidding, or bargaining. It has become a significant tool for analyzing real-life conflicts, such as a labor negotiations, international political conflict, price wars, and most recently federal auctions. The theory emanates from studies of games such as chess or poker, where plays plan their moves based on expected countermoves from competitors. These interactions also characterize many economic situations, and game theory has proven useful in economic and political analysis.

In 1964, when Harsanyi joined the Haas faculty, he was asked to be one of 10 game theorists to advise the US Arms Control and Disarmament Agency on its negotiations with the Soviet Union. “We discovered that we couldn’t advise them on this matter because these negotiations represented a game with incomplete information, in which each side knew little about the other side.”

Harsanyi developed a systematic procedure to convert any incomplete-information game into an equivalent complete-information game containing random moves. He described this new theory in a three-part article entitled “Games with Incomplete Information Played by Bayesian Players,” which is now the basis for all work on games with incomplete information. “The concept of incomplete information was known for a long time, but no one ever analyzed it systematically,” says Harsanyi.

Fellow Nobel winner Reinhard Selten spent two years at Haas collaborating with Harsanyi and other faculty in the late ‘60s and early ‘70s as a visiting professor. The principal result, A General Theory of Equilibrium Selection in Games, turned out to be an 18-year project for co-authors Harsanyi and Selten. The book provided for the first time a way of choosing a unique equilibrium – a choice for each player that is best against the others’ choices.

Selten also worked with Haas Professors Austin Hoggatt on experimental economics and later with Tom Marschak, with whom he co-authored a book, General Equilibrium with Price-Making Firms, and two articles.

Selten, who lives outside Bonn in an area called the Seven Mountains, is the first German to win the Nobel Prize in economics. A mathematician by training, Selten showed through his research how players’ behavior might change if they knew they were going to play again the next day.

A more recent application of game theory was the Federal Communications Commission’s auction for the narrowband spectrum for the next generations of wireless services, used for advanced paging the messaging.

“Issues of auction design are vitally important,” says Haas Professor Michael Katz, who is currently on leave as chief economist of the FCC. “Getting things right means that the spectrum will be allocated to those who will bring the most valuable services to the public”. All the telecommunications companies participating in the auction used game theorists to advise on their multimillion dollar bids.

From Budapest to Berkeley

John Harsanyi, born in Budapest in 1920, started his career in his father’s pharmacy. “I didn’t have the slightest interest in that particular human endeavor,” Harsanyi admitted during his October 11 press conference. “But being of Jewish origin, I realized that I shouldn’t study a very theoretical subject, and studying [pharmacy] allowed me to defer my service in a forced labor unit.” Harsanyi even planned to enroll in the Ph.D. program, but no professor could take him.

“Finally, there was a very liberal-minded botany professor and he took me as a student. But then came the problem that I was supposed to produce a dissertation. For this purpose, I had to get a plant and cut it into very thin slices with a razor blade, and I somehow just couldn’t do it. The idea was to slice it so thin that it was completely colorless. Well, mine was the most beautiful green you could ever see. And then the Germans occupied Hungary in ’44 and all military deferments – especially of Jewish people – were withdrawn.”

Harsanyi was drafted into a labor unit of the Hungarian army stationed near Budapest. When the Nazis took over the Hungarian government completely in 1944, they started deporting these labor units to Austria. “Most of the people who were deported never came back, mainly because they didn’t get enough to eat. However, I was taken to a railway station in Budapest, and I stood there for several hours until the train would come to take us to Austria. And though I’m a very slow thinker, I realized there was only one way out. Luckily we were in civilian clothes. So I took off my backpack and my armband that showed I was in labor units, and walked out. There was a gendarme whose task would have been to ask for my documents, but he didn’t.” A Jesuit friend then gave Harsanyi refuge in a monastery.

Speaking Freely

After the war, Harsanyi enrolled at the University of Budapest to earn a Ph.D. in philosophy, which was his real interest. He accepted a teaching appointment in sociology under a very liberal Marxist professor. “He had the ambition to have an interdisciplinary department with communists, socialists, and non-Marxists like myself,” says Harsanyi. “And-though in Budapest there was no free speech since the communists had taken over-in the department you could talk as freely as you liked. I made very bad jokes at the expense of my Marxist friends, and nobody cared about this. But the situation became much worse six months later, and they started remembering my bad jokes, and they remembered them as being much worse than they really were. So the result was that in June 1947 my professor told me I should voluntarily resign.”

In the meantime, Harsanyi had met his future wife Anne in a course he taught. “She is now a very punctual lady, but in those days she wasn’t,” he recalls, “and unfortunately my course started at nine o’clock, and she was often late. So one day I said, ‘Miss don’t you know when the class starts?’ She got very annoyed with me, and that was the start of our acquaintance.”

After resigning from the university, he worked in his father’s pharmacy; Anne was still a student in psychology. “She was harassed all the time that she was going out with me-this ‘anti-Marxist fascist,’ as they called me. They tried to force her to break up with me-which she didn’t. So, finally, in 1950, we realized that it was really too hot for us and left Hungary. That was, I think, the wisest decision we ever made. It was a dangerous thing to do, but it would have been more dangerous to stay behind.”

Academia Down Under

They soon made their way from Austria to Australia, where Harsanyi worked in a factory and took night classes at the University of Queensland, Brisbane, until he was offered a teaching appointment in 1954. Building on Nash’s published work, Harsanyi made an important discovery in game theory, which unfortunately Lloyd Shapley (now at UCLA) had published four years earlier. “I was a little isolated in Australia,” Harsanyi explains. “I sent my paper to the American Economic Review, and they enlightened me about the facts of life-but, in any case, I learned something.”

In 1956 the Harsanyis first came to California and he received his Ph.D. in economics from Stanford in 1959. His mentor there, 1972 Nobel laureate Kenneth Arrow, advised him to take a lot of mathematics and statistics courses. When Harsanyi submitted his dissertation, Arrow said, “This is all right, but you know we are not a mathematics department, we are an economics department. You have to add at least one economic example.” Harsanyi did that and submitted what he describes as “one of the shortest economic dissertations ever.”

Harsanyi began teaching at UC Berkeley’s business school in 1964. When he retired in 1990, he was awarded The Berkeley Citation at a conference held in his honor, at which Arrow was one of the presenters. Later, Harsanyi’s friends Selten and Horace W. Brock edited a Festschrift for Harsanyi’s 70th birthday-Rational Interaction: Essays in Honor of John Harsanyi.

Considering Alternatives

“In more than four decades of scholarship, John Harsanyi has probed the idea of rationality in human affairs,” former Haas Dean Raymond Miles wrote at the time of Harsanyi’s retirement. “His work centers on two difficult puzzles. The first is the formal study of what it means for rational persons to take ethical positions or make moral judgments, and how a society of rational but distinct individuals can properly choose among the alternatives it faces. The second has been game theory, that is to say that rigorous formulation of appropriate behavior for rational persons who are in conflict with other rational persons. Professor Harsanyi’s contributions to both puzzles have been absolutely fundamental.”

Harsanyi’s work on ethics, social choice, and welfare economists showed that once a culture adopts utilitarianism–the 19th century notion that one person’s satisfaction can be measured against another’s–then it has an array of powerful tools to use in choosing among alternative policies, laws, and institutions.

At his press conference, Harsanyi expressed hope that game theory would help private and public institutions make better decisions. In the long run, he explained, better decision making will lead to a higher standard of living and more peaceful and more cooperative political systems.

His own experience with the socio-political forces in his native Hungary under German occupation and under Communist rule have shaped Harsanyi’s interest in ethical and moral dilemmas and the power of social forces. “These experiences of course gave a special bias to my interest in social and political questions,” Harsanyi says, “because I realized how important it is to live in a democratic society, and more important, in a liberal society in which people are free to express their opinions, free to associate with other people, and free to lead the life they want to lead.”

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

May 1, 2018| by Laura Counts

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*

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 in-crowd: New book makes case for “Radical Inclusion”

April 25, 2018| by Michael Blanding

As an undergrad at Berkeley, Ori Brafman had been many things—a peace and conflict studies major, anti-war protestor, and vegan activist whose McVegan campaign had taken on McDonald’s and won. The last place he thought he’d find himself a decade later was in the office of a 4-star army general. “At the time, I had no idea what a 4-star general was,” admits Brafman, BA 97, a Berkeley Haas lecturer who teaches improvisational leadership in the MBA and undergraduate programs. “My first question was, ‘Is there a 5-star general?’”

Yet, that meeting in 2009 with Former Chairman of the Joint Chiefs of Staff Martin Dempsy would lead to an unlikely collaboration examining just how much the definition of leadership has changed in the era between the Twin Towers attack and the rise of “fake news.” Their ongoing conversation has culminated in the publication of a new book, Radical Inclusion: What the Post-9/11 World Should Have Taught Us About Leadership.

The economic case for inclusion

The book makes the case that in military bunkers and corporate boardrooms alike, leadership today means bringing everyone into the fold.

“Typically we look at inclusion as something that’s nice to have from a psychological perspective,” Brafman says. But he and Dempsey argue that including everyone in a way that gives them stake in decision-making makes economic sense as well. Members of an organization who don’t feel a sense of buy-in will be a drag on productivity, or jump ship altogether, costing time and energy in finding their replacements. “From an economic perspective, you are actually paying a cost for control. You need to ask yourself if you could achieve the results through inclusion in a more economically efficient way,” Brafman says.

At the same time, inclusion is vital to communication, for leaders to both receive and transmit essential truths. “You need inclusion to get better information from the edges of the network and also to be able to analyze that data. And you need enough different people around you, so you are not surprised by a piece of data when it comes in,” Brafman says.

Radical inclusion lessons from Burning Man

Dempsey contacted Brafman after the publication of his first book, the Starfish and the Spider, which argues for the effectiveness of distributed networks over top-down hierarchy. A New York Times bestseller, the book resonated with everyone from Greenpeace to the Tea Party. It also struck a chord in the military, which had been struggling to diffuse authority in order to counter the threat posed by distributed terrorist networks in the wake of 9/11.

In their first meeting, Brafman showed the general slides from Burning Man, the famously hedonistic annual gathering of artists and iconoclasts in the Nevada desert. The power of the event, Brafman insisted, came from the fact that everyone is welcomed—and everyone is encouraged to participate—creating an intimate sense of shared purpose among diverse individuals which enables them to create a successful gathering in the harshest of conditions.

As Brafman began talking to Dempsey, however, he realized that he had just as much to learn from the Army’s strengths in this same area. “A big part of their sauce is that they engender a sense of belonging,” he says. That sense of belonging is the first key to inclusion, the authors write. “The most important responsibility of leaders—no matter how busy they are and how many other priorities demand their attention—is to make their people feel like they belong.” The way to do that, they continue, is to devote time into building shared memories—whether it’s a kind word in the hallway or on the battlefield, or an unexpected phone call or visit—that makes people feel like they are valued participants whose work matters to the organization.

Amplifying voices

Beyond making employees feel included, Brafman and Dempsey say, leaders must also communicate both inside and outside the organization in an inclusive way. In a world of distributed information, organizations can no longer count on persuading audiences with facts alone. As organizations compete with viral videos and “fake news,” they must also create the best story. “As a leader you are responsible for creating a narrative of the organization both internally and externally,” says Brafman. “Then your job becomes how do I create a sense of ownership and involvement with that narrative.”

Brafman and Dempsey further distill their own message into six leadership lessons, such as “Co-Create Context” and “Relinquish Control,” which help to apply the principles of inclusion to create a successful organization. “If you are saying I need to control my people, then you might have control, but you are not going to win in this market,” Brafman says. “Right now, listening and amplifying voices and winning the competition of narratives is much more important.”