Archive for the ‘Uncategorized’ Category
This is an essay I wrote for the National Marriage Project (reprinted in Charlottesville Daily Progress). It concerns the successful handling of money within a marriage. The National Marriage Project was supported by the University of Virginia and the Institue for American Values.
The article quotes me, but mainly I post it because the writer (Jason Zweig) does a very good explaining how some simple psychological biases can lead to bad decision making by consumers/investors. In an age when many people are handling much of their own long-term investing decisions, the economic consequences of these biases are quite serious.
I never sleep very well the night before teaching a case. New cases are particularly hard, but even well-worn cases can wake me up for the day at 4 AM.
Lecturing causes me no such problem. My sleep is sound.
The unsettling issue is one of control. Lecturing allows me to do two things that make my life comfortable. One is to pick material that aligns with my interests, experiences and graduate training. The second is that, relative to a case discussion, I have a much higher degree of control over the flow of the class. It is harder for a student to divert the conversation into an area which might have a great degree of practical importance, but in which my own knowledge is thin. Cases are wide open, messy, and the direction of class conversations can defy even my best attempts at prediction.
When I walk into a class in which I’m going to discuss the analytical technique conjoint analysis I know that my knowledge of that particular technique is a hundred times better than anyone in the room. When I am going to lead a case where a manager is struggling with a large strategic issue for which there is no neat solution am far less sure of my knowledge.
Control is a warm blanket in the uncomfortable world of the teaching pit.
Henry Mintzberg has blasted the top graduate business schools for being overly technique-focused at the expense of educating students to muddle through the ambiguity of complex business problems by drawing lessons from their own experiences. Mintzberg is right, but these problems in business education persist not because of some deeply held belief on the part of the professoriate that management can be turned into a science. They persist because the alternative is hard for professors, expanded preparation time for classes and the occasional sleep-deprived night.
Recently, I had lunch with the CEO of one of the world’s leading civil engineering firms. This company has built some of the world’s most notable and known bridges and tunnels. They were considering an executive education program at Darden for their top engineers who would be entering senior management positions. I asked the CEO if there was one skill set he wanted to see his people get out of the program. Without hesitation he replied, “dealing with ambiguous situations.” “My people are smart. If the problem has a solution they will find it. If the problem does not have a solution they are a disaster….and it is killing us.”
They are coming to Darden. They’ll enjoy it, but they’ll find class uncomfortable —- as will I.
Marketing has created some of the things I like least about modern society. I hate strip malls, big box stores with endless parking lots, luxury fragrances, watches, handbags and the like whose marketing preys on the social insecurities of potential buyers. As marketers we have found the vulnerabilities of human beings, often in the dark fissures between what people think will make them happy and what does make them happy, and we exploit them. We have helped build a world rampant with consumerism, and we are mentally and spiritually poorer for it. The struggle for things, and more things, creates unhappiness as we trade precious time we could be spending with friends and family making sure we tend to the activities that secure us more things. If research in the psychology of happiness has taught us anything, it is that this is a bad bargain. This trade-off in favor of consumption over free time, based partly on evolutionary predisposition towards conspicuous consumption, creates less happy human beings.
These are the easy, knee-jerk thoughts for me. They contain both a great deal of truth, but also a lack of understanding about the role of marketing in world.
Without marketing a good idea lives out its life in the head of its creator. It may be a good idea or a bad idea. Who knows? Almost anything you can think of that makes the modern world an exciting place started as an idea that was communicated to others, tested by some kind of markeplace and finally either adopted or rejected. This is true whether you are talking about an i-Phone, P&G’s Swiffer, or the Protestant Reformation. These ideas were marketed.
And we are better off for it. YouTube, Facebook, Vespa Scooters (yes – I am a sucker for the retro, enviro, uberurban image), Retail Relay, Cardboard Safari, the movie “Julie and Julia” I saw last night are all things that add to my happiness. They are ideas, tested and shaped through commercial pursuit — through marketing, that allow me to experience some of the joy and creativity of the creators.
Much like the discipline of physics, or anything else worth studying, marketing can move mankind forward or visit horrors upon him. What is harder about marking, I believe, is that it is not always so obvious what creates and what destroys. Does iTunes add to our ability to enjoy our leisure time or just add to the clutter of modern consumerism? What about a new flavor of ketchup? I think there are some obviously bad ideas (payday lending establishments) some obviously good ideas (healthier varieties of food) and then a whole lot of ideas about which it is difficult to be sure. But I don’t have to be sure. That is why marketing exists, to create, test and to refine. And that process is made more socially productive when marketers are careful and honest about the potential benefits of their products. Socially productive marketing relies on ethical behavior, and a legal stucture that nudges the wayward marketer in that direction. That admission should come as no surprise. A skilled financial adviser can protect the retirement assets of her clients, or create a Ponzi scheme. A nuclear physicist can spend their life working towards clean energy, or a dirty bomb. A skilled marketer can bring forward ideas and products that have real benefits, or those whose commercial viability rely on half-truths and the exploitation of common human weaknesses.
David Brooks published an op-ed this morning entitled “The Great Unwinding.” It discusses the impact of public and private debt on the growth prospects for the U.S. economy. Unfortunately, it overstates the case for the value of an important statistic — how much the U.S. savings rate will have to rise to put the economy back on firm economic footing. Citing a Federal Reserve study, Mr. Brooks writes:
“Reuven Glick and Kevin J. Lansing of the San Francisco Fed estimate that Americans will have to increase their household savings rate from 4 percent to 10 percent by 2018 to restore balance.”
No they don’t, at least not in any meaningful way. I’ve read this report. It is a perfectly fine report, but it is highly preliminary in nature. The authors essentially compare the Japanese corporate sector after their housing bubble burst in the early 90’s, detailing how much corporate deleveraging occurred, and then show that if U.S. households behaved similarly to Japanese companies they would end up saving about 10%. The authors are clearly using this data, and a few assumptions, to come up with some kind of ballpark estimate. I’m sure they themselves would not put much faith in the 10% number, as housholds and companies behave differently for a whole host of reasons.
Mr. Brooks reports this finding the same way one would report the results of some exhaustive research on the subject. That’s a shame. Very few people will read this Federal Reserve report, but many will read Mr. Brooks and use this statistic as a focal point for further discussions of policy.
“Franklin’s Thrift: The Lost History of An American Virtue,” published by Templeton Press, was released this week. The contributors to this volume, myself included, trace how from the eighteenth century on the idea and practice of thrift has been part of the American vision of economic freedom and social abundance. The historic practice of thrift, far from being an exercise in miserly behavior, is rooted in the belief that communities can use the benefits of thrift to build themselves up and to forge social bonds. Thrift, we argue, is a prerequisite for community advancement.
As our own culture of indebtedness has brought us to the brink of economic failure, history calls our generation to the great battle of our times. Our fathers and grandfathers secured the beaches of Normandy. We must secure a nation drowning in private and public debt. Without the practice of thrift there can be no wealth. Without wealth there can be no generosity. And without public and private generosity the social bonds that built this nation will tear at the seams.