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

Berkeley Haas Finance Prof. Christine Parlour has researched cryptocurrency prices.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.

So sue me: Why narcissistic CEOs can get their firms in legal trouble

Research by Berkeley Haas Prof. Jennifer Chatman shows that narcissistic CEOs are more likely to engage in protracted lawsuits—and are no more likely to win.

Berkeley Haas research found narcissistic CEOs more likely to engage in lawsuits.

In the classic myth of Narcissus, a handsome hunter falls in love with his reflection in pool. Unable to tear himself away, he wastes away and dies. In business, the real problem with excessive self-regard comes less from inaction than from reckless action—such as plunging into the dangerous waters of litigation.

“People who exhibit high levels of narcissism can make charming, extroverted leaders who are bold in taking risks and persisting against formidable odds,” says organizational culture and leadership expert Jennifer Chatman, Paul J. Cortese Distinguished Professor of Management at the Haas School of Business. “The downside is they are overconfident and tend to focus on the potential benefits and minimize the costs of risky actions. One manifestation of this is that narcissistic CEOs are more likely to lead their organizations into court.”

The dark sides of narcissism

Prof. Jennifer Chatman
Prof. Jennifer Chatman

In a new paper published in The Leadership Quarterly, Chatman and her colleagues found that narcissistic CEOs are significantly more likely to engage their firms in lawsuits and less likely to settle cases. The paper, co-authored by Stanford’s Charles O’Reilly (Berkeley MBA 71 and PhD 75) and UC Berkeley researcher Bernadette Doerr, is part of a series of four studies that examine the effects that narcissistic leaders have on their organizations.

“It’s true that some level of narcissism can help a leader succeed,” Chatman says. “But there are some very real problems with excessive narcissism that can have drastically negative consequences for companies.”

Those dark sides—according to a growing body of research—include a greater tendency to cross ethical lines, such as engaging in financial fraud or tax avoidance, as well as toxic behaviors such as aggression, bullying, or sexual harassment. In an earlier study, Chatman and her colleagues found that narcissistic CEOs also command significantly higher salaries, winning over boards with their confidence of success, and that the gap between narcissistic CEOs’ compensation and those of their top management teams widened over time.

Employees rate their CEOs

Past research has characterized narcissism with such traits as a sense of personal superiority, overconfidence, a desire for power and admiration, a willingness to manipulate others for personal gain, and an inclination toward hostility when faced with criticism. To gauge the narcissism of CEOs, Chatman and her colleagues went straight to those most likely to feel its effects: their employees. Surveying a sample of 250 employees from 32 of the largest publicly traded US hardware and software firms, the researchers asked employees to rate how much on a scale of 1 to 7 their bosses were “arrogant,” “egotistical,” “temperamental,” “extroverted,”and other adjectives that describe narcissistic personalities.

In addition, the researchers cross-referenced these scores with other measures, such as the number of times CEOs used first-person pronouns in letters and the size of their signatures—both measures associated with narcissism—in order to develop a narcissism score for each executive.

Chatman and her colleagues then correlated these numbers with the number and length of lawsuits each firm noted in its annual report. They found that CEOs who were rated as more highly narcissistic led firms that were more likely to be named as defendants in a lawsuit. Lawsuits involving narcissistic CEOs also lasted longer, implying that those leaders were less willing to settle suits quickly—even though they were no more likely to win them.

Why do narcissistic CEOs engage in lawsuits?

In order to better understand why narcissistic CEOs were more likely to become involved in lawsuits, Chatman and her colleagues also ran two experiments. They used a personality test to gauge participants’ degree of narcissism and then they randomly assigned them to imagine one of two different scenarios: what would they do if they were a CEO launching a new product, and the company’s lawyers said there was either low chance or a high chance they would be sued?

The researchers found a striking difference between those who scored low on narcissistic traits and those who scored high. When the chances of being sued were 20 percent, the narcissists and non-narcissists were equally likely to proceed. Yet when told there was an 80 percent chance of being sued, the narcissists were almost three times as likely to go forward with the launch, with about 62 percent saying they’d proceed.

“Narcissists appear to be both less sensitive to high risk and less likely to listen to advice from expert advisors, especially when there’s a chance of a high payoff,” says Chatman. “Further, this greater propensity for risk reflects narcissists’ confidence in their own judgment and suggests that they may be more likely to engage in extremely risky behavior.”

In another experiment, the researchers found a similar pattern in participants’ likelihood of settling a lawsuit. When told the risk of losing was high, 79 percent of non-narcissistic individuals were willing to settle, while only 40 percent of the narcissists said they’d settle.

Harmful to the bottom line

Taken together, Chatman and her colleagues’ research joins a growing body of literature that shows that narcissism isn’t merely an annoying personality trait that carries with it some ancillary benefits; rather, it can be dangerous to a company’s long-term stability and bottom line.

“We already know that most people—and even the boards of directors who hire CEOs—confuse strong leadership attributes and some of the key attributes of narcissists, such as grandiosity and overconfidence, so CEOs are significantly more likely to be higher in narcissism,” Chatman says. “It’s important to pay attention to the difference, because narcissists appear to have a significant, and negative, impact on the organizations they lead.”

Chatman adds that boards should look for CEOs who have a track record of incorporating expert views into their own thinking, and those who can develop inspiring and strategically relevant visions that bring others along with them, and avoid hiring those with narcissistic personalities.

 

More research by Jennifer Chatman

How Himalayan mountain climbers teach us to work better together

New case study examines how Haas can sustain its culture

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

Haas welcomes a record number of MBA students

A collage of photos of new MBA students during Week Zero.Berkeley Haas welcomed the two largest MBA classes in the school’s history this semester: 291 full-time students and 276 evening & weekend students, all with outstanding academic credentials.

“We’ve always had the demand and now we’re so happy to have the space to accommodate more students,” said Jamie Breen, the assistant dean of MBA Programs for Working Professionals at Haas. The extra space comes thanks to Connie & Kevin Chou Hall, the student-centered building that opened last fall.

“Haas is a truly unique and special community, and top students from around the world continue to choose us for the quality of our programs and our distinctive culture,” said Morgan Bernstein, executive director of Full-time MBA Admissions. “These students are already coming together as a class, preparing for what we know will be a rewarding time here.”

Full-time MBA Week Zero

The new full-time MBA students arrived last week for an orientation that included tackling a business case, hours of volunteer work at Alameda Point Collaborative, a rousing cohort Olympics, and a session on diversity and inclusion.

“Week Zero has been a great experience—just jam-packed with information and networking, so it was both exhausting and fun,” said Tiffany Tran, MBA 20, who is from Long Beach, CA., and most recently worked at Annie’s (now part of General Mills) as a senior sustainability analyst.

Full-time MBA students competing in the cohort Olympics.
Full-time MBA students cheering on their team competing in the cohort Olympics. All photos: Jim Block.

The cohort Olympics for the Class of 2020 was a highlight, she added. “My cohort, Oski, won the championships,” she said. “We’re quite proud of that!”

The class of 291 students—up from 284 last year—is comprised of 43 percent women, and 34 percent international students. As a group, they are academically exceptional, with average GMAT scores of 726 and average GPAs of 3.66.

About one quarter of the new students worked in consulting; 20 are from banking/financial services; 10 percent from high tech; 9 percent from nonprofits; and 7 percent from healthcare/pharma/biotech. The group includes 14 U.S. military veterans, representing the Air Force, Army, Marines, and Navy.

Interim Dean Laura Tyson welcomed the students, noting that the MBA program has transformed thousands of students lives in meaningful ways over the years. “Many, many people come to business school to transform, to make a change in their career path and their goals or their sector or their role in an organization, and that’s what we give people: the skills to do the transformation you want to do, and stay authentic to yourself,” she said.

Interim Dean Laura Tyson addresses the new class of full-time MBA students.
Interim Dean Laura Tyson addresses the new class of full-time MBA students.

The MBA program continues to select students who show leadership skills that reflect the school’s Defining Leadership Principles: Question the Status Quo, Confidence Without Attitude, Beyond Yourself, and Students Always.

Oriol Pi Miloro, who arrived at Haas from Barcelona, said all of the students he’s encountered so far share a common awareness of the world beyond themselves. “Every single classmate I have met demonstrated a genuine interest on the most pressing issues of our society,” he said. “And they came to Haas to tackle these issues.”

Miloro said he’s looking forward to joining the Haas Finance Club, the Haas Impact Investing Network and Q@Haas, the LGBTQ club.

“This class is just an amazing group with such an interesting and diverse array of career and life experiences—and an enthusiasm for our school’s mission and Defining Leadership Principles,” said Peter Johnson, assistant dean for the full-time MBA program and admissions.

The class includes a ski instructor who worked with disabled people at Disabled Sports Eastern Sierra; a student who speaks seven languages, including German, French, Arabic, Hindi, Urdu, and Spanish; a student who already holds a master’s in public administration and a juris doctorate and was admitted to the state bar in both New York and Washington, DC; a student who introduced a rural micro-flush toilet to schools in Ghana; and a Black Hawk helicopter pilot.

A surprise visit from Wes Selke, MBA 07, and managing director of Better Ventures.
A surprise visit from Wes Selke, MBA 07, and managing director of Better Ventures.

Each day of “Week Zero”—which was co-chaired by second-year students Annie Sept, Elaine Hsu, and Antoine Orard—centered around one of the Defining Leadership Principles.

Sept said her first impression of the new class is that they are both extremely thoughtful and participatory and that they are “having a blast.”

“I’ve already seen a lot of cohesion and friendship,” she said. “People are comfortable saying vulnerable things to each other. There’s general support from classmates. They’re excited to be here for sure, and that makes us feel good.”

Entrepreneur Heather Hiles
Entrepreneur Heather Hiles

During the week, Heather Hiles, CEO and managing partner of Imminent Equity, spoke to the students about showing up as their authentic selves. Hiles, who was recently named among Vanity Fair’s “26 women of color diversifying entrepreneurship in Silicon Valley, media and beyond,” spoke to the theme of questioning the status quo and highlighted a diverse career.

Hiles has founded non-profit organizations, written public policy, managed a large portfolio at the Bill and Melinda Gates Foundation, and raised the most money of any African American woman for her e-portfolio startup, Pathbrite, which helps students document their achievements. Most recently she founded the first women-led private equity fund: Imminent Equities, focused on emerging technologies.

Wes Selke, MBA 07, also joined the class for a debrief on a case they were asked to read about his company, Oakland-based Better Ventures, which is focused on social investments. Better Ventures invests in companies that measure their success not only by revenue and profitability, but also by their products’ quantified, positive social or environmental impact. Other alumni speakers included Tom Kelley, partner at IDEO and founder & chairman of VC firm Design for Ventures in Tokyo, and Manuel Bronstein, vice president of product for Google Assistant.

Evening & Weekend students stand strong with the "We are one Haas" message of inclusiveness.
Evening & Weekend students stand strong with the school’s “We are one Haas” message of inclusiveness.

Evening & weekend class arrives

Last month, a record number of Evening & Weekend students arrived for orientation, called WE Launch, July 27-29. With 276 students, this is the largest class in the program’s history. The class is 33 percent women and 39 percent international.

Evening & Weekend MBA students arrive on campus for WE Launch.
Evening & Weekend MBA students in the Ax cohort arrive on campus for WE Launch.

“Our orientation was such a strong bonding experience for our students, who are all starting to come together as a group,” Breen said. “The study teams plunged right in.”

The Evening & Weekend program has been ranked the #1 part-time MBA program in the U.S. by U.S. News & World Report for the past six years.

MBA students’ globe-trotting education with GNAM

Students participating in the GNAM program concluded their week preparing and sharing traditional Irish food at Ballyknocken Cookery School with owner and chef Catherine Fulvio.
Students participating in the GNAM program in Ireland concluded their week preparing and sharing traditional Irish food at Ballyknocken Cookery School with owner and chef Catherine Fulvio.

On a recent study trip to Ireland, Laura Hassner found herself in a Dublin supermarket chatting with a Slovakian classmate who co-owns 250 bakery outlets about the difference between stores that buy dough from factories versus those that bake from scratch.

For Hassner, EMBA 18, the business strategy conversation was one of many outlining the unique challenges facing small businesses as well as conglomerates during a “The Future of Food” course taught at University College Dublin’s Michael Smurfit Graduate Business School. The course, with 30 international students enrolled, is one of many offered through the Global Network for Advanced Management (GNAM), an international consortium of 30 business schools that Haas joined three years ago.

Founded by the Yale School of Management in 2012, GNAM allows graduate business students to study at a member school, joining other students from around the world for a week of lectures, discussions, field trips, and immersion in another culture.

Students participating in GNAM select from a range of classes and locations; in the fall of 2018, for instance, students at member schools will choose from 16 classes, including “Leadership Challenges in Latin America,” offered at the Pontificia Universidad Católica de Chile School of Business, and “Service Excellence in the Tourism Industry,” taught at the University of Indonesia Faculty of Economics.

Opening perspectives

While Haas has forged relationships with other business schools in the past, it accepted the invitation to join GNAM to give its students more opportunities in far more countries. Many Haas students have lived or worked internationally, but they haven’t had this kind of learning experience abroad, says Jamie Breen, assistant dean of Haas programs for working professionals, adding that Yale School of Management is the only other U.S. institution in the network.

Studying in a GNAM course “opens up different perspectives for students and makes them think about the assumptions they bring to the table,” Breen says. “They will come to a topic area with a U.S. lens and then suddenly learn the history, government, and regulatory and social framework of the country they’re in,” she said.

For some Haas students, participating in the program helps further interests that are personal as well as professional.

Brian Tajo, EMBA 18, who moved to the U.S. from the Philippines as a child, in June traveled to the Asian Institute of Management in Manila for a class on growth strategies for southeast Asian nations. Tajo, who has family living in the Philippines, says that the course strengthened his understanding of the economies of southeast Asia and will help him ultimately fulfill a personal goal of working in economic development in the Philippines.

<em>L-R:</em> <em>Rocky Lee, associate dean of the Asia Institute of Management, Brian Tajo, EMBA18, and Professor Federico Macaranas. Tajo traveled to the Asian Institute of Management in Manila for a class on growth strategies for southeast Asian nations.<br />
L-R: Rocky Lee, associate dean of the Asia Institute of Management, Brian Tajo, EMBA18, and Professor Federico Macaranas. Tajo traveled to the Asian Institute of Management in Manila for a class on growth strategies for southeast Asian nations.

“That aligned with my life ambition,” says Tajo, currently a senior product manager at software company Salesforce. Given the growth potential of southeast Asia, “I’m fortunate to have a head-start” in learning about the region, he says.

Women in leadership

All Haas students are eligible to participate in GNAM classes and earn two credits for their overseas study. In June, 35 Haas students attended courses at 11 schools, while 33 students from other institutions came to Haas to take the class “Women’s 21st Century Leadership,” taught by Professor Laura Kray.

Among other issues, students discussed gender inequality around the world. “We certainly had some interesting conversations about how some of the pathways for equality that we’ve identified that work in a U.S.-centric environment require further nuance and contemplation in cross-cultural settings,” said Kray.

The class provided the chance to “brainstorm a future that’s appreciative of women’s leadership strengths,” she added.

Students can also take GNAM’s online classes taught by business faculty at member schools. INCAE Business School in Costa Rica, for one, expects to offer a semester-long class in operations management analytics in the fall, while University of British Columbia’s Sauder School of Business plans to teach a course entitled “Urban Resilience.”

Haas is considering offering online classes in game theory or entrepreneurship.

Breen sees future opportunities for collaboration among Haas and other schools in the network. Possibilities include holding joint alumni events and opening Haas’s annual Global Social Venture Competition to students at network schools, with a goal of forming teams comprised of students from both Haas and member schools.

Participating in GNAM, Breen says, “has been enormously successful for us.”

Faith in an MBA: A priest comes to Berkeley Haas

John Gribowich, EMBA 19, outside of Chou Hall at Haas.
John Gribowich, EMBA 19, outside of Chou Hall at Haas.

With his horn-rimmed glasses, wool sweater, and goatee, John Gribowich blends in with many of the buttoned-down professionals in the Berkeley MBA for Executives Program (EMBA) at UC Berkeley’s Haas School of Business.

But Gribowich, 39, is equally comfortable in a robe — as a priest who often leads Mass at St. Joseph the Worker Church after beginning his day serving breakfast at dawn to the homeless in downtown Berkeley.

“I never take my priest hat off,” says Gribowich, who has chosen to live at St. Joseph’s throughout the 19-month EMBA program, which typically draws a cohort of about 70 professionals from around the world to learn leadership, strategy, entrepreneurship, and finance. “I am always conscious of it. As a priest, you are always connected to ministry. I say Mass at church here, and I haven’t ceased doing priestly ministry. I am just not full-time in a parish.”

<em>Father John Gribowich and lead cook Robert Bradshaw clean up after community breakfast they helped serve at the Dorothy Day House
Father John Gribowich and lead cook Robert Bradshaw clean up after community breakfast they helped serve at the Dorothy Day House in Berkeley. (UC Berkeley photo by Brittany Hosea-Small)

Last April, Gribowich was released from his parish duties in Brooklyn, New York, where he served as an assistant pastor, to work at DeSales Media Group, the communications arm of the Diocese of Brooklyn. At the time, DeSales, which publishes and broadcasts news from a Catholic point of view, had plans to launch a big tech project to connect and modernize the systems shared by all of the diocese’s local parishes.

Gribowich was chosen to be a consultant for the project, but needed the technology project management skills required to do it. “My bishop said, ‘You need the right schooling,’” he says. “I said, ‘An MBA makes sense for everything I need to do.’ I set my sights to the west, where there’s a great creative and progressive vibe.”

After one visit to UC Berkeley, he decided the campus was a perfect fit for him because of its culture, commitment to public service and social justice, and location as a tech hub. “Who I am as a Catholic, who I am as a priest, who I am as a person, just syncs perfectly with Berkeley’s mission,” he said. “It’s seamless.”

Taking a gamble, Gribowich applied only to Berkeley Haas. It paid off, and he headed to California, joining a diverse EMBA cohort that this year includes an artificial intelligence expert in the Pentagon, four doctors, an expert on rare wine and an Italian woman who commutes to class from her solar power startup job in China. One student speaks seven languages, while another helped rescue 11 hostages in a military operation.

Gribowich is the only student priest in the history of the EMBA program, says Susan Petty, the program’s director of admissions.

Father John Gribowich prepares to celebrate a weekday mass at the St. Joseph the Worker church in Berkeley. (UC Berkeley photo by Brittany Hosea-Small)</em>
Father John Gribowich prepares to celebrate a weekday mass at the St. Joseph the Worker church in Berkeley. (UC Berkeley photo by Brittany Hosea-Small)

Growing up in Bucks County, Pennsylvania, just north of Philadelphia, Gribowich says he felt pulled to the priesthood as early as first grade. While initially drawn to the priest’s external actions, the intellectual and spiritual sides of the vocation had become more intriguing and attractive to him by high school.

Ordained in June 2015, Gribowich was assigned as parochial vicar at St. Nicholas of Tolentine Roman Catholic Church in Jamaica, Queens. His days were busy. “Some people mistakenly think being a priest is just working Sundays,” he says. “But you’re meeting with people, attending to sick calls, going to hospitals. It’s a very demanding and full schedule. No two days are ever the same!”

As a priest, he says he’s aligned with a long tradition of Catholic creativity that he feels has waned in recent years and that he would like to help revive. “There is something about being Catholic that should intrinsically stir innovation, because you are constantly searching for that which is real and true in the world,” he says. Gribowich adds that his creativity is inspired by everything from playing guitar to listening to Bob Dylan to studying a Caravaggio painting.

As a Catholic, Gribowich follows the teachings of the late Dorothy Day, a political radical who was central to the pacifist Catholic Worker Movement, which combines aid for the poor and homeless with nonviolent direct action professed by Indian activist Mahatma Gandhi. Five years ago, Gribowich’s love of Dorothy Day led him to help found a Catholic Worker farm in Harvey’s Lake, Pennsylvania, where workers and students visit to connect with the land. The farm, run by two of his former undergraduate professors from DeSales University, a private Catholic university, donates its produce to local food pantries.

<em>Gribowich gives communion to worshippers during a weekday mass at the St. Joseph the Worker church. (UC Berkeley photo by Brittany Hosea-Small)</em>
Gribowich gives communion to worshippers during a weekday mass at the St. Joseph the Worker church. (UC Berkeley photo by Brittany Hosea-Small)

At UC Berkeley, Gribowich finds that the classroom is another opportunity for creative connections and discussions. So far, he’s found the MBA coursework — accounting, data analytics, microeconomics — challenging as well. (His master’s degree is in art history from Pratt Institute, which never required subjects like calculus, he says.) Gribowich says he’s surprised at how supportive his classmates have been as study partners and friends. “There’s a genuine openness,” he says. “I can see these people being friends for life.”

Carol Shumate, one of Gribowich’s EMBA classmates, says students were curious about him from day one, when they all introduced themselves. “They were like: ‘What’s a priest going to do with an MBA in the church?’” she recalls. That first day, she says, Gribowich drew the biggest laugh of all when he described his love of Bob Dylan, whom he has seen perform more than 40 times. “He put his hand up and said, ‘This is how much I love God.’ And then he put the other hand just beneath it and said, ‘This is how much I love Bob Dylan,’ ” Shumate says.

Shumate, who calls Gribowich “one of the most fascinating people I have met in the recent past,“ says she’s always surprised when he talks about history and art, sometimes breaking out in song. One day, he crooned Neil Sedaka’s “Oh! Carol” to her, a song she’d never heard but which he explained to her in detail.

Sometimes Gribowich’s theological background emerges in class, where he likes to strike up conversations and doesn’t shy away from controversy, says classmate Adam Rosenzweig. “He knows a lot and thinks a lot and has been trained about how people relate to God and religion,” he says. “We all bring various expertise to the program, but nobody forgets what (Gribowich) does.”

Professor Lucas Davis, who teaches statistics, says Gribowich’s unique perspective comes through “even in a class as a class as dry as statistics,” where Gribowich, rather than answering a question, might question Davis’s thought process in asking the question.

After Gribowich graduates, he plans to return to Brooklyn and his job at DeSales, where he will navigate the process of providing local parishes and nonprofits with tech tools to manage everything from data — such as historical information found in the church’s marriage and baptism documents — to the church’s financial records.

But for now, he’s enjoying UC Berkeley and the academic experience in his EMBA class, which will head to Santa Cruz this month to explore leadership communications in one of the program’s five week-long experiential field immersions. Other immersions include trips to Silicon Valley, San Francisco, and Washington, D.C., as well as overseas.

“I love it here,” he says. “I’m surrounded by so many creative people. It puts me in awe.”

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

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

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

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

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

A remarkable success story

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

Prof. Emeritus David Vogel
Prof. Emeritus David Vogel

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

Surprising business support

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

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

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

Wilderness allies

Half Dome_California Greenin' by David Vogel

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

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

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

Creating new markets

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

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

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

Continued threats

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

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

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

 

How success breeds success in the sciences

Matthew effect_Mattijs De Vaan

 

A small number of scientists stand at the top of their fields, commanding the lion’s share of research funding, awards, citations, and prestigious academic appointments. But are they better and smarter than their peers? Or is this a classic example of success breeding success—a phenomenon known as the “Matthew effect”?

Berkeley Haas Asst. Prof. Mathijs De Vaan studied the "Matthew effect"
Asst. Prof. Mathijs De Vaan

Mathijs De Vaan, an assistant professor in the Haas Management of Organizations Group, believes it’s clearly the latter. In a paper published this week in Proceedings of the National Academy of Sciences, “The Matthew Effect in Science Funding,” De Vaan presents the results of a study of Dutch research grants that shows precisely how much of an advantage early achievement confers, and identifies the reasons behind the boost. De Vaan, who came to Haas in 2015 after earning a PhD in sociology from Columbia University, co-authored the paper with Thijs Bol of the University of Amsterdam and Arnout van de Rijt of Utrecht University.

“To those who have, more will be given”

The term “Matthew effect” was coined by sociologist Robert Merton in the 1960s to describe how eminent scientists get more recognition for their work than less-well-known researchers—the reference is to the New Testament parable that, to those who have, more will be given. Previous attempts to study this phenomenon have yielded inconclusive results, in part because it is hard to prove that differences in achievement don’t reflect differences in work quality.

To get around the quality question, De Vaan and his co-authors took advantage of special features of the main science funding organization in the Netherlands, IRIS, which awards grants based on a point system. Everyone whose application scores above the point threshold gets money, while everyone below is left out. The authors zeroed in on researchers who came in just above and just below the funding threshold, assuming that, for practical purposes, their applications were equal in quality.

First off, they found the benefits of winning an early-career grant were enormous. Recent PhDs who scored just above the funding threshold later received more than twice as much research money as their counterparts who scored immediately below the threshold. The winners also had a 47 percent greater chance of eventually landing a full professorship. “Even though the differences between individuals were virtually zero, over time a giant gap in success became evident,” De Vaan notes.

Status and participation

De Vaan says that two main mechanisms may explain the Matthew effect in science funding. First, winners achieve status that can tilt the playing field in their direction when it comes to funding, awards, and job opportunities. The second is participation, meaning that successful applicants continue seeking grant money, while unsuccessful applicants often give up, withdrawing from future competition.

De Vaan and his coauthors argue that the Matthew effect erodes the quality of scientific research because projects tend to get funded based on an applicant’s status, not merit. Groundbreaking work may not get done because the researchers are unknown or too discouraged to compete for funds. They recommend several reforms to the funding process, including limiting information grant application reviewers have about previous awards. They also suggest that rejected applicants learn their scores, which might encourage those just below the threshold to try again.

These findings may apply in many areas beyond science. For example, the Matthew effect may also widen a gulf between winning and losing entrepreneurs in the race for venture capital. Even the Academy Awards may favor big movie industry names over lesser-known talent. “There are a lot of social settings with large amounts of inequality, which could be ripe for the study of the Matthew effect,” De Vaan stresses.