Stanford GSB Lifelong Learning

Speaker Forum: Credit Card Pioneer Fairbank Recalls the Early Days

Fri, 06 Nov 2009 18:10:55 GMT

As founder of Capital One Financial Corp., Richard Fairbank revolutionized the credit card industry with teaser rates and zero-balance transfers. But in the beginning he recalls, he had "no money, no experience, and no ideas."

October 2009

STANFORD GRADUATE SCHOOL OF BUSINESS —As an MBA student at the Stanford Graduate School of Business, Richard D. Fairbank, MBA '81, like many of his peers, knew he wanted to start a company. "But I had no money, no experience, and no ideas," Fairbank recalled.

Several years later inspiration struck in the form of a consulting assignment with a bank. With new technology emerging, and the knowledge that the credit card industry was ripe for change, Fairbank started what is now Capital One Financial Corp. He made a return trip to his alma mater Oct. 16 to speak before a capacity crowd as part of the View from the Top speaker series.

As chairman and chief executive officer of Capital One, Fairbank sits atop a financial services conglomerate that, back in the early 1990s, revolutionized the credit card industry. With innovations such as teaser rates and zero-balance transfers, he helped transform credit cards. Two years ago Cap One moved into retail banking.

The McLean, Va., company is No. 130 on the Fortune 500 list of top corporations and the nation's 10th-largest bank. It has $106.8 billion in deposits, 45 million customer accounts, and 25,800 employees. Its commercials featuring the tagline "What’s in your wallet?" are immediately recognizable.

Fairbank, 58, offered students some thoughts about business and careers. Among them is that Capital One is a people-centric company, and he'll go to great lengths to find the best ones.

"I chased our CFO for 10 years," he said. "I tell people I'm stalking them, and you’re on my short list." Companies that spend 2% of their time recruiting and 75% of their time managing their recruiting mistakes don't have the right people, he said.

And, he said he totally believes in the "people model" of a corporation. "It’s not about you; it's about them," he said of his leadership style. "So many spend so much energy showing how good you are, but it's not about you. Worrying about yourself is a bankrupt leadership model."

He also urged students not to worry about failure. He said he initially asked banking companies such as Wells Fargo and Citibank to invest in Capital One. Although they refused, he gained valuable insight into the industry.

"It’s not failure; it's feedback," he said. "Great forward progress comes from setback. Try to harness that energy, and turn it into something that otherwise might not be possible."

Finally, Fairbank urged students to "dream instead of chasing the next step in a career." He advised them to spend less time managing their resume and more time investigating opportunities as they come along. After business school he didn't set out to become a consultant, but a consulting job exposed him to a variety of industries where he learned about structure, process, and management.

"The only way I got to run a very large public company was by not seeking to do it," he said. "I see so many people losing sight that this is not life or death. Don't sell your soul but do the best you can."

Fairbank also received his BA from Stanford, class of 1972. He is part owner of the Washington Capitals hockey team.

— Joyce Routson

Research: Is "Thinking" or "Feeling" More Persuasive?

Fri, 06 Nov 2009 18:10:16 GMT

Identical messages can have different impacts depending on whether they are couched as "I think" or "I feel," says Stanford Graduate School of Business Marketing Professor Zakary Tormala.

October 2009

STANFORD GRADUATE SCHOOL OF BUSINESS —Suppose someone says, "I think it’s the right thing to do." Or "I feel it’s the right thing to do." It’s the same thing, right?

Well, not exactly. Ask Zakary L. Tormala, a Stanford Graduate School of Business associate professor of marketing, who has found that substantively identical messages can have a different persuasive impact depending on whether they are couched in terms of their source's thoughts or feelings.

"Even without changing your actual arguments, you can make subtle framing changes by saying 'I think' or 'I feel’ to make your message more persuasive," said Tormala, who studied volunteers with Nicole D. Mayer of the University of Illinois at Chicago. "We find that people who are emotionally oriented respond more favorably to messages that begin with 'I feel,' whereas cognitively oriented or thinking-oriented individuals respond more favorably to messages that begin with 'I think,' even when everything else that follows is exactly the same."

In one study, after determining whether participants tend to rely more on their emotions or thoughts in making decisions, each person received a message with several arguments in favor of blood donation. These arguments were identical except that they were framed in terms of the source's thoughts or feelings.

For instance, one message, entitled "My Feelings About Blood Donation," started with, "I feel that donating blood is one of the most important contributions I can make to society." It went on to include several more arguments framed in terms of the source's feelings — for example, "I feel that blood donation is the most fantastic thing I can do with 30 minutes of my free time."

In a different condition, the message was entitled "My Thoughts About Blood Donation," and opened with, "I think donating blood is one of the most important contributions I can make to society," and went on to frame the exact same arguments in terms of the source's thoughts — "I think blood donation is the most fantastic thing I can do with 30 minutes of my free time."

Aside from the use of the word "feel" or "think" throughout the message, the content of the arguments was identical, yet those more emotionally oriented were more impressed with (and persuaded by) the "feel" arguments, while those more cognitively oriented liked the "think" arguments better. These are group results, of course; no subject read both the "think" and "feel" arguments.

Tormala and Mayer also found differences between the sexes. "Generally speaking, women tend to self-identify as being more emotionally attuned than do men, and this plays out in persuasion," said Tormala. "In one study, we found that women were more persuaded by an ad for a new movie when it quoted reviews beginning with 'I feel.' Men, however, were more persuaded by the same basic ad when it quoted reviews beginning with 'I think.'" Tormala warned against interpreting these findings as having anything to do with intelligence or intellect. "Our studies simply show that people have different preferences for persuasive arguments that appear to reflect their source's thoughts or feelings."

Ultimately, these "think versus feel framing effects," as Tormala calls them, could be applied to promote different brands or products more effectively. IBM, for example, has long had a slogan of "Think," so consumers might have mostly cognitive or rational associations with the brand. On the other hand, Tormala said, Apple computer ads tend to emphasize creativity, trying to make a more emotional connection with consumers. "Although we didn't test this specific hypothesis, our findings suggest that think and feel messages might be differentially effective in promoting these two brands."

— Dave Murphy

Research: Just Hearing About a Stock Bubble Won't Keep Investors Out of Trouble

Fri, 06 Nov 2009 18:09:38 GMT

August 2009

STANFORD GRADUATE SCHOOL OF BUSINESS—Investors who lived through the dot-com bubble are unlikely to forget it. But although the still-raw details of that era have been documented in countless publications—and are likely to be ensconced in MBA textbooks for decades to come—those who didn't experience it will probably not learn from history.

That's because intellectual knowledge of the risks of over-hyped and overvalued stocks doesn't seem to do investors much good when it comes to avoiding future speculative disasters. Instead, first-hand experience of a bubble appears to be necessary to make investors wary of returns that seem too good to be true.

"After a crash, people are quite aware of the potential dangers and adjust their investing behavior accordingly. But after 20 years or so, that memory is erased, and you again have the conditions that make another bubble possible," says Stefan Nagel, an associate professor of finance at the GSB who, with coauthor Robin Greenwood, an assistant professor of finance at Harvard Business School, has written a paper titled "Inexperienced Investors and Bubbles."

Nagel was interested in how investors formed expectations for the future, as well as in market conditions that lead to market bubbles. "In this study, we were trying to connect those two things," he says.

Although there have been some theoretical studies and laboratory experiments examining these topics, "there is a big gap between these experiments in artificial laboratory settings and the empirical research we performed," says Nagel, who teaches the core finance class to MBAs, as well as a course in empirical finance in the PhD program.

In the study, Greenwood and Nagel examined the portfolio decisions of experienced and inexperienced mutual fund managers during the technology bubble of the late 1990s. They used data from Morningstar, a provider of mutual funds research and ratings that maintains a database of funds and profiles of their managers.

By categorizing fund managers by age, Greenwood and Nagel found that at the start of the bubble in 1997 younger managers bet on technology stocks at rates that actually trailed those of older managers. But leading up to the bubbles' peak in March 2000, younger managers dramatically increased their holdings of such stocks.

"The funds by younger managers took aggressive positions in technology stocks—much more than those by older managers," says Nagel. Particularly after quarters when technology stocks had done well, younger managers shifted their holdings further into technology stocks. "Young managers chased the trend, but older managers did not," Nagel says.

And as the bubble developed further, new money was flowing into the funds run by the younger managers. This seemed to be driven by the fact that investors tend to "chase" funds that have been performing well. "At the beginning of the bubble, younger managers tended to perform better than older ones, thus attracting more investors to their funds and perpetuating the cycle," says Nagel. The result was that although younger managers started out in 1997 with relatively small funds, the amount of money they controlled had quadrupled by March 2000 when the bubble finally burst.

After the bubble ended, younger managers experienced "outflows"—investors taking money out of their funds—but, interestingly, not more so than comparable funds run by older managers, despite the worse overall performance by younger fund managers. "During the upturn, there were substantially more inflows for younger rather than older managers," says Nagel. "But after the crash, younger managers didn't necessarily experience more outflows. Thus for mutual companies, the failed dot-com investments of younger managers turned out to be not that costly," says Nagel. "For those investors who piled into young managers' funds before the peak of the bubble, the picture looks different, of course."

The findings of the study point to a difference in beliefs of younger and older fund managers. "It seems that older managers were more skeptical about how well these technology stocks would do in the future," Nagel says. That might surprise economists who, in theory, believe there should be no difference whether a fund manager has first-hand experience or not. Knowledge is what matters, regardless of how it has been acquired. "And after all, even if you're a younger manager, you should still have learned about past bubbles and what happened in the stock market over the past 100 years. In fact, MBA programs teach this," Nagel says. "But it turns out that on-the-job experience is what counts."

Nagel currently has another related project in progress with Ulrike Malmendier, an assistant professor at the University of California, Berkeley. They are analyzing the actions of individual investors, examining how their investments in stock versus other assets correlates with their personal experience. The researchers see evidence that personal experience dramatically impacts investment decisions. "If someone lived through the Great Depression, or was young in the 1970s or 1980s when stock market performance was very poor, and experienced lousy returns, he or she is much less likely to put money in stocks," says Nagel. "Almost inevitably, they choose other assets to invest in."

The implications of the study are a bit ominous. "Go out 20 or 30 years from now, and it's possible we'll see another bubble," Nagel says. Is there a moral here? Always invest in funds with older managers? Not necessarily. "After all, if you had ridden the tech boom for the short run only, you would have done very well," Nagel says. Over the long term, of course, it would have paid off to have gone with an experienced manager. "So it's very difficult to generalize," he says.

—Alice LaPlante

Related Information

"Hedge Funds and the Technology Bubble," Markus K. Brunnermeier and Stefan Nagel, Journal of Finance, 2004.

GSB News - Economics Prize for John Van Reenen

Fri, 06 Nov 2009 17:57:45 GMT

October 2009

STANFORD GRADUATE SCHOOL OF BUSINESS —John Van Reenen, director of the Centre for Economic Performance at the London School of Economics and a visiting professor at the Stanford Graduate School of Business, is the 2009 recipient of the Yrjö Jahnsson Award in Economics.

The award recognizes a young European economist who has made a major contribution in theoretical and applied economics. It has been equated with the John Bates Clark prize given by the American Economic Association, which recognizes the early work of similarly successful young economists who may go on to receive a Nobel Prize.

"John Van Reenen has made several contributions to the empirical analysis of labor markets, competition policy, and industrial economics, especially in areas relating to productivity growth, management practices, R&D, intellectual property, and investment decisions. He has also done pioneering work on the organizational structure of the firm and its relation to innovation, contributing both with empirical evidence and measurement tools," the European Economic Association said in announcing the prize.

He shares this year's prize with Fabrizio Zilibotti of the Institute for Empirical Research in Economics, University of Zurich.

Van Reenen is scheduled to teach at the Stanford Business School during winter quarter and is a regular visiting professor at the School.

GSB News - Montgomery Named INFORMS Fellow

Fri, 06 Nov 2009 17:43:20 GMT

October 2009

STANFORD GRADUATE SCHOOL OF BUSINESS —David B. Montgomery has been named a fellow of the Institute for Operations Research and the Management Sciences (INFORMS). The Kresge Professor of Marketing Emeritus, Montgomery was cited for "research contributions to marketing science, marketing strategy, and global marketing and management."

He was one of 11 new INFORMS fellows honored at a celebration in San Diego in October. Montgomery is the fifth member of the Business School faculty be named a fellow of the prestigious organization. Others are: Hau Lee, J. Michael Harrison, Evan Porteus, and Lawrence Wein.
INFORMS recognizes "outstanding contributions, achievements, and services that have advanced the profession of operations research and the management sciences." Also honored as a fellow was Margaret Brandeau of Stanford University’s Department of Management Sciences and Engineering.

Montgomery is dean emeritus and consultant/visiting professor of marketing and management at Singapore Management University. He has published over 100 articles and 10 books.

He received the 2002 Mahajan Award for career contributions to marketing strategy from the American Marketing Association and his paper on First Mover Advantages received the 1996 best paper award from the Strategic Management Society.

GSB News: Five Tenure-Track Professors Added to Business Faculty

Fri, 06 Nov 2009 17:42:27 GMT

October 2009

STANFORD GRADUATE SCHOOL OF BUSINESS —With recessionary pressures on budgets, the Business School hired fewer new faculty members than in recent years but was able to recruit three experienced professors and two who recently completed their doctorates. Their research and teaching address many contemporary issues.

Charles I. Jones, the STANCO 25 Professor of Economics, is a macroeconomist noted for his work on long-run economic growth. He has examined sources of growth in incomes over time and the reasons underlying the enormous differences in standards of living across countries.

Charles M. C. Lee, the Joseph McDonald Professor of Accounting, is an expert on the workings of markets who has been an accountant, a visiting economist at the New York Stock Exchange, and a managing director at Barclays Global Investors, as well as a professor in the business schools at Cornell and Michigan.

Steven Callander, associate professor of political economy, studies the behavior of voters and candidates in elections as well as the design of electoral systems. He focuses on understanding how uncertainty and learning affects political outcomes in a variety of institutional settings. His research has appeared in leading journals of economics and political science. He earned his doctorate at Caltech and previously taught at the Kellogg School of Management.

Two more newcomers are John-Paul Ferguson, assistant professor of organizational behavior, and Ali Yurukoglu, assistant professor of economics.

Ferguson’s recent research dissertation work at MIT was honored as the best graduate work in two categories by the American Sociological Association. He studies the effects of hostile environments on new organizations. His research on trade-union formation, for example, shows how greater company opposition to unions has encouraged employees to favor diversified rather than specialized unions.

Yurukoglu, whose PhD is from New York University’s Stern School of Business, applies statistics and game theory to the study of regulatory policy and imperfect competition in the media and telecommunications industries. Recently he worked on a topic of strong interest among consumers – a la carte pricing regulations in cable television, and negotiations and mergers between cable channels and cable distributors.

Jones, who is also a research associate of the National Bureau of Economic Research, is the author of two macroeconomic textbooks as well as numerous research papers. He has used his expertise in macroeconomic methods to study the economic causes behind the rise in health spending and longevity. He began his teaching career in Stanford’s Department of Economics in 1993 and comes to the Business School from the faculty of the University of California at Berkeley.

Lee, who spent last year at the Business School as a visiting faculty member, has a long resume that includes biblical studies and work as a KPMG accountant. He is fluent in Mandarin Chinese and also serves as cochair of the accounting department at Guanghua School of Management at Peking University.

Broadly speaking, he is interested in the effect of human cognitive constraints on market participants, as well as the dynamic process by which markets incorporate information into prices. Besides his numerous honors for research, he has received many for effective teaching, and lectures on that topic to faculty in his field.

Speaker Forum: Meet the Dean: An Overview of the Stanford GSB

Fri, 11 Sep 2009 23:45:20 GMT

Dean Garth Saloner talks about the importance of critical thinking, leadership development, and cutting-edge faculty in developing principled leaders. Video

Speaker Forum: Oracle CFO's Career Didn't Follow Straight Path

Fri, 11 Sep 2009 23:44:07 GMT

When Jeff Epstein, MBA '79, went to work for Boston Consulting Group on Sand Hill Road, he didn't know about a young company a mile away, a company that would later become Oracle. Three decades later, Epstein is Oracle's chief financial officer, but his path was no simple one-mile drive. (Video Available) Details

Research: Services Market Is Key to Open Source Software

Fri, 11 Sep 2009 23:43:09 GMT

Open source software has become a major and fast-growing presence in the computer industry in recent years. GSB Professor Tunay Tunca and his co-authors argue that the key factor in whether to create open source software is the strength of the market for support, integration, and related services for such programs. Details

Research: You Can't Buy It if You Don't Know It Exists

Fri, 11 Sep 2009 23:42:30 GMT

Rock groups can lose as much as 40 percent of their potential sales because consumers don't know enough about them, says the GSB Professor Alan Sorensen. There are lots of crowded markets out there where lack of information skews sales. Details

Research: Courting So-So Customers Can Be Good for Business

Fri, 11 Sep 2009 23:41:32 GMT

Marketers often lavish attention on their best customers, but GSB Professors James M. Lattin and V. Srinivasan suggest it may be more cost effective to increase their spending on clients who only occasionally use their products or services. Details

GSB News: Read Stanford Business Magazine Online

Fri, 11 Sep 2009 23:39:49 GMT

This issue features insights on social activists and consumers who shake up the status quo in markets for food and wine, cars and computers, and even for corn grinders in Africa. Don't miss class notes and an article on our new GSB Dean, Garth Saloner. Details

GSB News: Forbes Ranks Stanford #1 MBA Program in 2009 Best US Business Schools

Fri, 11 Sep 2009 23:38:54 GMT

See current media rankings for the GSB, nationally and internationally. Details

GSB News: Knight Management Center Update

Fri, 11 Sep 2009 23:37:19 GMT

A year after the September '08 groundbreaking of the GSB's Knight Management Center campus, the underground garage is now nearing completion, and steel framing is up on four of the eight buildings. View the latest construction videos and live web cams. Details

News - June Stanford Business Magazine Online

Thu, 04 Jun 2009 20:48:03 GMT

Read June Stanford Business Magazine Online
Step inside an "Extreme Affordability" design class, watch a YouTube-assembled orchestra, see alums' blogs and recommended books in the newest magazine issue. Read Online

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News - Remarks by David Kreps

Thu, 04 Jun 2009 20:47:12 GMT

Remarks by David Kreps, Associate Dean For Academic Affairs,Theodore J. Kreps Professor of Economics

Delivered at the dinner honoring Dean Robert L. Joss - May 7, 2009

STANFORD GRADUATE SCHOOL OF BUSINESS - It is an honor, privilege, and pleasure to be able to speak for the faculty on this occasion, and to say Thank You to Bob Joss for his leadership over the past ten years.

Bob has always told me that the way to judge how you are doing as a manager and leader is to ask, Are the units or functions you are managing getting better and stronger, year over year? If that's the test, then Bob has been an extraordinarily successful manager and leader of the GSB. The best evidence of this is the Provost's list of accomplishments of the past decade.

Since the Provost answered the question What has Bob accomplished?, I'd like to ask and then give my answer to the question, Why was Bob able to accomplish so much?

And to give my answer, I will digress: Perhaps four months ago, I was invited by the Provost and Prof. John Roberts to meet with the committee that is advising the President and Provost on Bob's successor.

As I prepared for this meeting, I decided that the best assistance I could give them was to tell them the characteristics I thought are most important in a successful dean for the GSB. My list had three items.

First, to be successful, the dean must understand the mission and strategy of the GSB. In two words, he must get it.

That's harder than it sounds, because the GSB tries to do two things at once. It is one of the best professional schools of management in the world - I'd say the very best, but why quibble?

And it simultaneously tries to be a great research institution, focused on the problems and environment of managers and management, but extending to foundational work in the social sciences and in empirical and mathematical methods for the social sciences.

These two missions can, in the short run, come into conflict. To increase achievement along one line, you must make short-run compromises in the other.

But the strategy of the school is based on one premise above all others: In the long run, these two missions are complementary. What looks like a short-run compromise of one for the other is, when done right, a long-run investment in both.

The Dean has to understand this, first of all.

And then, second, he or she has to be able to communicate this to a wide variety of sometimes skeptical audiences. These range from the general business press and business community, which doesn't get the research part, to a stereotypical Professor of Comparative Literature, who doesn't understand this foreign body in his or her university.

And between those two extremes are: students of many types; alumni; faculty members within the school and outside; and, very importantly, the leadership of the rest of this great university.

One-size-fits-all communication won't work, and a successful dean has to be able to speak convincingly to all those groups.

And, third, having gotten it, and having communicated it, the Dean has to implement it. Or, more accurately, the Dean has to work through a variety of individuals - has to lead and manage - the implementation.

And this can be hard, because the people involved can sometimes be….to use a gendered term, for which I apologize…prima donnas. I will not assert before this audience that alumni can ever have prima donna-like characteristics, and of course it does not behoove me to say tonight that this has ever or could ever be true of the leaders of this university. But I think I can safely assert that students can sometimes be prima donnas. And my faculty colleagues certainly have shown those tendencies.

It takes a Dean with strong inner convictions, a strong political sense, great people skills, and a level of humility to make it work. It takes the ability to broker compromise that makes everyone feel good. It takes a sense of timing - knowing when to stick to one's guns, and when to say: "You make this call, because this affects you the most or because you are the expert on this matter."

So what does this have to do with Bob Joss? As I'm sure most of you have understood, I'm describing the characteristics of Bob that have made him such a successful dean. He gets it. He can communicate it. And he can make it happen.

The best evidence is the list of accomplishments the Provost provided.

But let me add an illustrative vignette. About a year ago, Bob and I attended a conference at the Harvard Business School, on the topic "The Future of the MBA." The room held about 100 people, about one third HBS faculty and senior staff, about one third prominent practitioners (mostly HBS alumni), and about one third academics from schools from Darden to the University of Chicago.

With that diverse an audience, you can imagine: There was a lot of spirited disagreement. But I can report that Bob fulfilled the Dean-Witter rule: When Bob Joss spoke, everyone listened. And nodded in agreement. He kept us focused on the big issues, and time after time he made a compelling case for why the mission was the right one and why our strategy was the right way to achieve the mission. I'm sure, had you been there, you would have been proud. I'm certain, because they told me so, that a lot of folks from a lot of other places were jealous.

So, Bob: You fulfill your own criterion of leaving the GSB a hugely better place. It has indeed been a decade of accomplishment. On behalf of the faculty, Thank you.

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News - Management Values that Count

Thu, 04 Jun 2009 20:46:18 GMT

Stanford Graduate School of Business Dean Robert L. Joss recalls powerful lessons from his grandfather, a dairy farmer

Dean Robert Joss

STANFORD GRADUATE SCHOOL OF BUSINESS - While I did not realize it then, I know today that I had learned nearly all the essentials of business management and leadership by the time I was 17. My teacher was my grandfather. He was a most unlikely teacher - being a high-school educated dairy farmer. But the lessons learned by watching and working with him in the 1950s are as powerful and relevant today as ever.

My grandfather's 340-acre farm was in upstate New York - within the little town of Putnam Station, about 10 miles from the (more famous) village of Ticonderoga. He was the third or fourth generation of his family to try to make a living on that property. That was never easy. With modest meadows for growing crops and hilly pastures for supporting livestock, it was challenging to generate enough agricultural activity to sustain a family. On top of that, my grandfather was not really cut out to be a farmer. He was a people person. At one time he was the town postmaster. At another time he was half-owner and manager of the local general store. Eventually, after prodding by my grandmother to make the farm more financially productive, in the late 1920s he bought a small herd of dairy cattle - as dairy farming was the predominant activity in that region.

Being a dairy farmer in the midst of the Great Depression was no picnic. The only operative business model for these small Putnam farmers was to put their daily milk output into 40-quart cans, which were then picked up periodically by a truck from the Dairymen's League cooperative for further processing and retail distribution by dairies and creameries. Even by the 1950s, milk still sold in this wholesale fashion for only 2 cents a quart. And that is what every local dairy farmer did.

Except for my grandfather! He decided to bottle his milk, put it in cases in the back of his pickup truck, and sell it door-to-door in Ticonderoga. With his convenient delivery, amazing personal service, and returnable glass bottles, his retail price was 15 cents a quart. So there was my first great management lesson - business models really make a difference! Strategy is all about being better by being different, and he was a very different kind of dairy farmer from his neighbors. In particular, he intuitively grasped the idea of creating and adding real value for the customer, and finding a way to get compensated for that value. It is such an important lesson - timeless in its applicability. No amount of technological change or globalization alters this fundamental truth about business. But there was a lot more learning.

The second thing I learned was about customer service - real customer service. We not only delivered door-to-door, we often (depending on customer preferences) put the milk right in the kitchen fridge. We knew every customer by name and background. He granted credit when people couldn't pay that week. He extended his product line to include cream, eggs, and poultry (the chicken "division" was run by my grandmother, who handled all the egg and poultry production) - classic brand extension moves when you have unique distribution skill. My grandfather was a true entrepreneur - an owner-operator always willing to innovate, to try new things.

Third was operational synergies. We "recycled" the cow and chicken manure as fertilizer for the hay meadows and cornfield, which meant his crop yields were always the best in town, thereby lowering the need to buy any additional cattle feed and keeping costs down. We recycled the milk bottles (indeed, most customers left their current payment inside an empty return bottle). We rotated crops to keep the fields highly productive.

Fourth was hard work and discipline. My grandparents worked incredibly hard. If you want to really understand what it means to be responsible "24/7" - then be a dairy or chicken farmer. The cows have to be milked twice a day, 365 days a year. You have to pick up the eggs and clean the henhouse daily. I worked with my grandparents almost every summer for eight years, rising early and retiring worn out; milking cows twice a day, cleaning stables, delivering milk in the mornings, and harvesting hay in the afternoons. The discipline and hard work were memorable, and very satisfying. They shaped my work habits for a lifetime in leadership roles.

Fifth was integrity and ethics. The customers trusted my grandfather and favored him with their business. He trusted them - sometimes too much, credit-wise. I can remember my grandmother worrying about certain people who owed him too much money, but my grandfather didn't have the heart to deny them milk for their kids. He was as honest as the day is long, and would never take advantage of a customer or supplier. Any dispute went in the customer's favor. He sold them products they needed, at a price that was fair (how's that for a timeless and winning business idea!).

Sixth was about cash flow. Almost everything in this operation was on a cash basis. He knew his daily revenue by adding up the cash each night, and we spent many hours counting and rolling coins, and wrapping bank notes, for deposit at the local bank. Most of the year our immediate family lived 2,500 miles away in an urban setting, but when we spent summers on the farm, my brother and I handled the direct-to-customer delivering while my grandfather drove the truck. We were like walking cash registers. We would start the day with our known cash supply (bills in one pocket, coins in the other), then take in the customer payments, make change, and account for our cash at the end of the day. Pretty easy to see how cash was the lifeblood of the operation.

Seventh was about interpersonal skill. As I said, my grandfather was a people person. He was outgoing and gregarious. Everyone knew him and greeted him warmly, and vice versa. Today we would say his social and emotional intelligence was very high. He was a living demonstration of the importance of managing relationships, as well as managing tasks, in any business. He wasn't a better farmer than anyone else in town, but he had this entrepreneurial and interpersonal dimension that few others had.

As a final lesson - my grandfather was all about having fun. He was fun to be with. He made life fun for all those around him. As hard as he worked, he just had fun doing it. His joy was infectious.
As I said, I had learned all this by age 17. But the wisdom and relevance of these eight lessons seem even more powerful today. We wouldn't be reading and talking about a global financial crisis if all our major institutional leaders had learned and practiced these lessons in recent years.

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Research & Ideas - Time to Detox the Work Environment

Thu, 04 Jun 2009 20:45:17 GMT

April 2009

Jeffrey Pfeffer
Thomas D. Dee II Professor of Organizational Behavior, Stanford Graduate School of Business

STANFORD GRADUATE SCHOOL OF BUSINESS - Corporate practices are having effects not just on polar bears and wetlands, but also they may be killing human beings, says Professor Jeffrey Pfeffer. The concept of "sustainability" must be expanded to include consideration of whether workplaces are good not only for the environment but also for people.

What Pfeffer calls toxic workplace environments, particularly in the United States, raise rates of disease and mortality. He urges business, government, and the media to pay attention to what has been a shockingly neglected topic. In the present distressed economy, he says, "the problem is only going to get worse."

"The lack of attention to employee needs helps explain why the United States spends more on health care than other countries but gets worse outcomes," says Pfeffer, the Thomas D. Dee II Professor of Organizational Behavior at the Graduate School of Business. "We have no mandatory vacation or sick day requirements, and we do have chronic layoffs, overwork, and stress. Working in many organizations is simply hazardous to your health."

Specifically, he says, epidemiological studies show that holding a lower-level position where one does not have much control over job activities and decision making puts employees at a higher risk of having—or dying from—a heart attack. "There's nothing more stressful than being in an environment in which you have a lot of pressure but relatively little power," Pfeffer says.

In addition, spotty or interrupted health care insurance—a typical consequence of layoffs and job changes—and the trend toward jobs that offer no health coverage at all, leads to a significant decrease in routine preventive medical screening procedures such as mammograms and cholesterol and blood pressure testing, and as a consequence, added risk to workers' health.

Pfeffer cites research showing that overwork and job stress lead to increases in smoking, alcohol abuse, and high blood pressure, while layoffs contribute to depression, violence, and even lowered life expectancy. "There is evidence that people who experience a layoff live 1.5 years less than those who don't," Pfeffer says.

The Stanford professor thus maintains that the concept of "sustainability" must be expanded to include not only whether corporations care for the environment and resource conservation, but also whether they are good for their employees.

As to why the serious question of worker well-being has been given scant attention by executives, regulators, and pundits, Pfeffer suggests it may have something to do with current mercenary cultural values. "There was a time when CEOs believed they had an obligation to all of their stakeholders, including employees," he says. "But over time, we've come to look at even the simplest things in financial terms. Childcare, for example, which used to be a matter between parents and children, is now a service to be traded on the New York Stock Exchange. This way of thinking is taking out the human factor."

The great irony, says Pfeffer, is that most workplace policies that are bad for employees are also bad for companies themselves. Organizations that are more "humane"--offering generous benefits, sick leave, vacation pay, health insurance, and so forth--are shown to be more profitable. Pfeffer points to companies such as Southwest Airlines, Kimberly-Clark in the Andean region, and kidney dialysis provider DaVita as exemplars. "I hope businesses will wake up to the fact that if they don't do well by their employees, chances are they're not doing well, period," Pfeffer says.

In the current economic climate, he notes, more people will be laid off, work longer hours, become saddled with increasing work responsibilities, and operate without health insurance. The government, Pfeffer says, will almost certainly need to step in with regulation. If nothing else, with health care costs on the rise, government should be looking to the workplace as one culprit in the decline in the quality of workers' health.

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Research & Ideas - Self-Identified Multiracial Individuals Realize Real Benefits

Thu, 04 Jun 2009 20:43:33 GMT

April 2009

STANFORD GRADUATE SCHOOL OF BUSINESS - At some point in your life, you've probably checked off a box on a form that asks you to specify your ethnicity. But educational and governmental organizations are under increasing pressure to include a multiracial option rather than forcing individuals with complex racial heritages to choose just one category.

For Kevin Binning, Miguel Unzueta, Yuen Huo, and Ludwin Molina, this raised a provocative question: Does identifying themselves as multiracial help or hinder the psychological well-being of individuals of diverse ethnicity?

Previous studies had assumed that if an individual had a multiracial heritage that he or she automatically identified with that heritage. Yet Binning and his fellow researchers hypothesized that simply belonging to multiple racial groups did not guarantee that a person would psychologically identify with all of those groups. "We thought that digging deeper into the multiracial category to examine how such individuals interpreted their racial identity would help our understanding of multiracial psychology," said Binning, a post-doctoral scholar at the Stanford Graduate School of Business and coauthor of "The Interpretation of Multiracial Status and Its Relation to Social Engagement and Psychological Well-Being," published recently in the Journal of Social Issues.

In the study, high school students who belonged to multiple racial groups were asked to indicate their ethnic heritage by checking as many boxes as necessary on a form. They were also asked an open-ended question about which groups they primarily identified with. They were then classified as identifying with a group the researchers had designated as having a relatively low social status (black or Latino), a relatively high social status, (Asian or white), or multiple groups (for example, black and white or "multiracial"). Those who identified with multiple groups reported either equal or higher psychological well-being and social engagement than those who identified primarily with a single group.

Interestingly, it didn't matter whether the groups the students identified with were characterized as low or high-status. "We were surprised to find virtually no differences between individuals who identified with either low- or high-status groups," said Binning. "What mattered was whether they acknowledged their multiracial identity." In the past, research suggested that members of high- and low-status groups differed psychologically.

Binning and his associates have some theories about why there might be some psychological benefits associated with having a multiracial identity. "For one, perhaps being able to 'stand one's ground' and reject social pressure to identify with a single racial group indicates resiliency," said Binning. Additionally, instead of falling between the cracks of two separate cultures, individuals who identify with multiple groups might be better equipped to assimilate into both racially homogenous and racially mixed environments. In this way, multiracial individuals in diverse environments might have a broader sense of "fitting in," which can boost both their psychological and social well-being.

Alternatively, being forced to identify with one race over another can be disconcerting. "If I'm a member of multiple groups and forced to identify with only one group, I'm - by necessity - rejecting part of my identity," said Binning. "Typically, this means taking on the race or ethnicity of one parent over another. This can put people on the defensive, emotionally."

The authors also felt that individuals who feel comfortable in several different cultures might be able to better "frame switch" between different cultural mind sets.

"Such individuals might be able to seamlessly switch between their different cultures' ways of perceiving the world, which could help them navigate through racially diverse environments," said Binning.

Given that this research highlights the benefits of possessing a multiracial identity, should society encourage individuals to adopt this attitude? "Much more research is needed to determine an answer to this," said Binning. A major question, for example, is whether adopting a multiracial identity causes psychological and social well-being, or if the reverse is true. "It could simply be that better-adjusted individuals tend to accept their multiracial identity," said Binning. "We're not sure at this point what the causal relationship is."

The data reported in this article is part of a larger data set collected with a UCLA Center for Community Partnership Grant awarded to Yuen J. Huo, an associate professor in social psychology at the University of California, Los Angeles. Coauthor Unzueta is an assistant professor at the UCLA Anderson School of Management. Molina is an assistant professor of social psychology at the University of Kansas.

One of the reasons that this research study is getting a lot of attention is President Barack Obama's own mixed-race heritage. "In his books he stresses his own mixed ethnicity, and how he struggled with that during his teenage years," said Binning. And as the U.S. population becomes increasingly heterogeneous, "this issue is only going to become more important in coming years."

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Speaker Forum - Former Foes Unite to Bridge the K-12 Achievement Gap

Thu, 04 Jun 2009 20:42:23 GMT

April 2009 - (Video Available) Details

STANFORD GRADUATE SCHOOL OF BUSINESS - McKinsey & Co. released a report that rocked both the educational and business worlds, putting a $700 billion price tag on the "education achievement gap" - or the difference between the performances of high- and low- income K-12 students. The Economic Impact of the Achievement Gap in America's Schools concluded that the impact of this gap on the U.S. gross domestic product (GDP) was equivalent to a "permanent national recession” - a recession much deeper and longer-lasting than the current one promises to be.

The report received front-page coverage in major media outlets, "and certainly got everyone's attention," said Jonathan Schorr, a partner at NewSchools Venture Fund, speaking at the 2009 Stanford Business of Education Symposium on April 30. "There was surprise that a respected business research organization would declare a crisis in education," he said and businesspeople were impressed that McKinsey had managed to calculate a dollar figure that actually measured the economic impact of that crisis.

This reaction was typical of the different perceptions that educators and businesspeople have long held about the U.S. educational system. "People who make the journey between the business and education schools know you are traveling across international borders with different languages, different cultures, different systems of beliefs, and different values," he said. And these differences are not exactly celebrated. "Businesspeople think educators are too nonlinear, fuzzy in their thinking, and that they use their hearts more than their heads," Schorr said. Educators, on the other hand, see themselves as "rivers of knowledge, bringing a wealth of ideas as well as actual practical classroom experience that benefits their students," he said. For teachers and educational administrators, "businesspeople are all head and no heart."

Schorr said the tension between these two groups resembles the battle lines journalist Michael Barone drew in his 2004 book Hard America, Soft America: Competition vs. Coddling and the Battle for the Nation's Future. Barone's thesis of division can also be viewed through the lens of politics, from the conservative right (hard) compared to liberal left (soft). In the educational universe, the battle is over such issues as who gets taught, what they are taught, and by whom, and how success is measured.

Acknowledging the divide, Schorr said today he's witnessing major changes by both sides crossing previously impenetrable lines. "The labels of 'hard' and 'soft' are starting not to fit, and a new space is being created where those categories are no longer useful," he said.

"I'm beginning to see alliances between liberal and conservative groups who are saying, 'We really have to find a way to get our kids to be more competitive,' and the people who are saying, "You don't understand what they've gone through just to show up," he said.

Schorr, a former teacher himself and a member of the founding group of Teach For America, also worked as a journalist and wrote about educational topics in such publications as the New York Times, the Los Angeles Times, and Washington Monthly. He also authored the critically acclaimed 2002 book Hard Lessons: The Promise of an Inner-City Charter School.

Today he is seeing what he calls a "fascinating coalition of political opposites." For example, he sees grass roots community- and church-based initiatives such as the Oakland Community Organization, which is "as soft as you can go," collaborating with the deeply conservative groups," he said. "These interactions that involve people from very different places in the political spectrum are going to happen more and more. We'll be seeing some very strange bedfellows - all of whom, however, are passionate about the education of low-income kids."

A case in point: John Walton, the son of Wal-Mart founder Sam Walton, whom Schorr characterized as an "arch conservative" agrees with many self-described liberals that education is the biggest problem this country faces. "His conservative belief that hard work and opportunity are required to earn a place in this country, and his commitment to founding charter schools in low-income neighborhoods to achieve this, has led him to fund some very 'lefty' groups," said Schorr.

What signaled most strongly to Schorr that the barriers between hard and soft were breaking down was a meeting held in Denver the Monday before the 2008 Democratic Convention. "This was an education forum which would have, in the past, attracted maybe five or ten people," he said. "But this time we had a standing-room-only crowd of more than 500." One of the surprises of the evening occurred when Cory Booker, a Stanford graduate who is the mayor of Newark, New Jersey, and a rising star in the Democratic Party, announced that Democrats have been wrong on education, and that it was time to get it right. "It was impossible to stand in that cheering crowd and not feel that something had changed in a truly profound way in this country," said Schorr. Barack Obama's subsequent election, and his rejection of tired dualities from the past, gives Schorr the confidence that we'll finally move past the same arguments debated for the past 30 years.

"Teachers want to improve performance. It's not a conservative or liberal issue," he said, quoting Obama. "We have to be willing to both embrace the idea of being truly held accountable with measurable results with children, and capable of embracing the children themselves. It's no longer a question of what side you are on, but what are you going to do?" he said.

Schorr is one of eight leadership partners of the NewSchools Venture Fund, a national nonprofit venture philanthropy firm in San Francisco that seeks to transform public education, particularly for underserved students, by supporting education entrepreneurs and connecting their work to systems change.

(Video Available) Details

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News - Economist Garth Saloner Named Dean of Stanford Graduate School of Business

Tue, 26 May 2009 21:23:46 GMT

May 26, 2009

STANFORD GRADUATE SCHOOL OF BUSINESS - Economist Garth Saloner, a scholar of entrepreneurship and business strategy, will be the next dean of Stanford University's Graduate School of Business, President John Hennessy and Provost John Etchemendy announced today.

Saloner, 54, who joined the Stanford faculty in 1990, is the Jeffrey S. Skoll Professor of Electronic Commerce, Strategic Management and Economics, and a director of the Center for Entrepreneurial Studies at the Graduate School of Business. He will succeed Robert Joss, who is stepping down after 10 years as dean. Saloner's appointment is effective September 1, 2009.

"Over nearly two decades at Stanford, Garth Saloner has demonstrated that he is not only a top-notch scholar, but also a respected leader among his peers and distinguished teacher highly-praised by his students," Hennessy said. "His scholarship in the areas of entrepreneurship and electronic commerce is particularly pertinent to our times and the global economy."

Etchemendy said Saloner has been a leader in the evolution of management education.

"Garth Saloner helped to lead the development and transition to a new curriculum that is truly reinventing the path to an MBA," Etchemendy said. "In his own words, this new curriculum is the 'innovation of the MBA.' As dean, Garth will ably continue the momentum generated by Dean Joss and maintain the research excellence of our business school."

Saloner said he welcomes the challenges ahead.

"The Stanford GSB has the opportunity to prepare future generations of principled critical analytical thinkers whose actions can change the world. Through our research, we will continue to develop the intellectual underpinnings of management and we will embody that knowledge in our teaching. From our sustainable new management center on the Stanford campus we will promote the free-flow of students, faculty, and ideas across disciplines and schools as we develop management knowledge and business leaders for the 21st century."

Saloner is known for his pioneering work on network effects, which underlie much of the economics of electronic commerce and business. Saloner's research has focused on issues of entrepreneurship, e-commerce, strategic management, organizational economics, competitive strategy and antitrust economics. Much of his most recent work has been devoted to understanding how firms set and change strategy, in established firms and startups.

Members of the search committee were impressed with the breadth of Saloner's experience and widespread respect he has earned across the academic spectrum, according to committee co-chair John Roberts, John H. Scully Professor of Economics, Strategic Management, and International Business in the Graduate School of Business.

"Garth Saloner is an outstanding teacher, a distinguished scholar and an experienced administrator with remarkable leadership skills, significant links to the business world and a global mindset," Roberts said. "He should be a great dean."

Saloner is one of only two faculty members to have won the Distinguished Teaching Award at the Stanford business school twice, first in 1993 and again in 2008. He has taught courses in entrepreneurship, electronic commerce, strategic management, industry analysis, and competitive strategy to undergraduates, MBAs, the Sloan Program, PhD students, and in executive programs around the world. He is the Director of the Summer Institute for Entrepreneurship, a summer program for graduate students in non-business fields.

Professor Saloner received a B.Com. and MBA (with distinction) from the University of the Witwatersrand in Johannesburg, South Africa. He received an MS in Statistics, an AM in Economics, and a Ph.D. in Economics, Business, and Public Policy from Stanford University between 1978 and 1982. He joined the faculty of the economics department at the Massachusetts Institute of Technology as an assistant professor in 1982 and was promoted through the ranks to the position of tenured full professor in both the economics department and the Sloan School of Management.

He was one of the founders of the Stanford Computer Industry Project, a major study of the worldwide computer industry, funded by the Sloan Foundation, and a founder of the Center for Electronic Business and Commerce. He served the Business School as Associate Dean for Academic Affairs, and Director for Research and Curriculum Development from 1993-96. In 2006, he led the Curriculum Review Committee that undertook a major overhaul of the MBA curriculum, allowing students more flexibility in customizing their coursework.

The Stanford Graduate School of Business, with a faculty that includes three Nobel laureates, has established itself as a global leader in management education and has built an international reputation based on educational programs designed to develop insightful, principled global leaders. Since its creation in 1925, the school has continued to innovate its curriculum and to build a faculty known for its cutting-edge research. It enrolls over 800 students in MBA, PhD and Sloan Master's programs and has more than 100 tenure-track faculty and 50 lecturers and visitors.

The school is currently constructing a new campus, the Knight Management Center, with 360,000 square feet designed to support a wider variety of teaching and learning methods and foster collaboration across disciplines. When completed in 2010-2011, the new campus of eight buildings around three quadrangles is expected to achieve the highest level LEED Platinum certification for environmental sustainability from the U.S. Green Building Council.

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News - Attention MBA Classes of 2006, 2007, and 2008

Thu, 02 Apr 2009 23:10:03 GMT

MBA Classes of 2006, 2007, and 2008 EIU's WhichMBA? Now Polling Alumni for B-School Ranking

The Economist Intelligence Unit, the research arm of the company owned by the Economist magazine, is polling recent MBA alumni for its annual "WhichMBA?" global ranking of schools to be published next fall. Last year Stanford ranked #4 in this survey. The deadline for participation is May 22. Details

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News - There is Still Money Out There

Thu, 02 Apr 2009 23:09:12 GMT

There Is Still Money Out There, Say Entrepreneurship Conference

February 2009

STANFORD GRADUATE SCHOOL OF BUSINESS - Even in the face of plummeting market profiles and climbing unemployment, it's a great time to start a business, counseled speakers at the annual Entrepreneurship Conference at the Stanford Graduate School of Business. Just be sure to use your GSB network connections. Oh, and have some fun.

The day-long conference, held February 25 as part of Entrepreneurship Week at Stanford, attracted some 400 students and professionals to hear more than 30 speakers invited by the student entrepreneurship club and the School's Center for Entrepreneurial Studies.

The conference got off to an easy-going start with the humorous observations of keynote speaker Paul Orfalea, founder of Kinko's Inc. Orfalea, who grew the copy chain to 1,200 shops worldwide, attributed his success to luck and observation rather than business prowess.

"I was very lucky I didn't have too many skills," he said.

A graduate of the University of Southern California ("near the bottom of my class"), Orfalea founded Kinko's in 1970 in Santa Barbara, Calif., after noticing one copy shop in town, frequented by University of California students, always had a line out the door. He rented a space and named the business Kinko's after his curly red hair.

Orfalea sold the business in 2004 to FedEx and retired at the age of 50. Today, he runs a foundation, invests in other businesses, and dispenses wisdom on the speaking circuit.

One of the stories he enjoys telling is how - lacking the ability to learn by reading, since he is dyslexic - he learned about business from experience. "I didn't like the written word," he recalled, but looking at the students lined up he could see a way to make money.

"Too many skills and too much knowledge can get in the way of important things," he said.

Orfalea advised young entrepreneurs to strive for balance in life. "You'll be a better leader if you're a more balanced person. All you workaholics, drink some beer."

Despite a sinking economy, panelists addressing "Entrepreneurship in a Difficult Economy" were bullish. Jim Goetz, a partner with venture capital firm Sequoia Capital, urged would-be entrepreneurs to follow their dreams. "If you have the passion, go ahead," he said. "Don't let the current environment stop you. There are plenty of folks with capital."

But he cautioned that in order to get venture capital, startups must focus on capital efficiency and have a solid value proposition. Some of Sequoia's significant investments today are in the medical device and healthcare services industries.

Munjal Shah, cofounder and CEO of Like.com, echoed Goetz's advice about opportunity in a downturn. . "There is opportunity," Shah said. "Get creative and figure it out - and see me."

In 2004 Shah founded Like.com, a visual search engine for shopping. The Stanford computer science graduate, MA '97, advised "being paranoid" about having enough cash, even in good times.

To weather the recession and keep the company on the path to becoming profitable, Like.com has eliminated employees even though it raised $30 million last year. "We sit on a lot of cash, but you can't architect a business if you have to worry about cash," he said. "You have to be cheap up front."

Bob Walters, president and CEO of Untangle, an open-source software seller, said recessionary layoffs mean great talent is available for your business. "You can recruit the finest athletes and upgrade your team," he said. "You want to be in the strongest position when the economy turns."

Walters said he has had to pare down staff and accelerate web development due to the recession. The San Mateo, Calif.-based company plans to break even next year.

Raising capital is tough for an early-stage company, but how do you get started when you've never owned a business before? The panel discussing "Starting a Business Right Out of School" featured four GSB graduates who head their own companies, all started in the past six years.

Darin Buxbaum, MBA '04, knew he needed a lot of money to take his medical device company from idea through R&D, trials, and approvals, and to market. "It looked like a very black hole," he recalled. But he said he learned to set short-term milestones. Instead of raising $3 to $5 million at the outset, he found $500,000 would let him build up enough of a track record to impress subsequent investors and get a prototype in the works.

His company, HourGlass Technologies Inc., is developing a device that can be delivered orally to reduce stomach size. The incisionless alternative to gastric bypass surgery is scheduled for market in 2012.

Buxbaum, like the other panelists, said the Business School faculty and their networks were helpful in connecting him to possible investors and other serial entrepreneurs. In addition to angel investors, he is currently seeking venture funding.

At the other end of the fundraising spectrum was Pete Flint, MBA '05, CEO of Trulia Real Estate Search. The three-year-old company has raised $33 million in venture capital and now has 80 employees. Flint said the Stanford network was not only valuable for introducing him to sources of income but also for people to help build the business basics. He used students to do basic coding for his website and the Business School's Center for Entrepreneurial Studies for office space. Of fundraising, Flint said his first investors weren't venture capitalists but rather from his network. "I met my first investor in the entrepreneurship club at the GSB," he recalled.

Brad Stroh, MBA '02, CEO of Freedom Financial Network, and his partner bootstrapped the company with $1 million from their own pockets, friends, and angel investors. Today the debt-relief company has 525 employees and three offices throughout the West. He said his Stanford Business School connection was invaluable when doing the groundwork for the company. "A cold intro with you saying you're a Stanford Business School student is a very powerful tool."

"The GSB is one of the richest entrepreneurial environments in the world," said Alyssa Rapp, MBA '05, founder and CEO of Bottlenotes.com, a personalized internet sommelier service with wine shopping, advice, clubs, and news.

Rapp said the Stanford network helped introduce her to wine industry executives who were instrumental in helping her map out the business and take the plunge. "I had a bunch of people who wanted to see me win," she said. "If you have people with obvious success stories coaching you, your risk is somewhat mitigated."

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News - Michael Shanahan, MBA '65, Honored with Arbuckle Award

Thu, 02 Apr 2009 23:07:57 GMT

February 2009

Video available at http://www.gsb.stanford.edu/news/headlines/arbuckle_09.html

STANFORD GRADUATE SCHOOL OF BUSINESS - Capital Research and Management Co. Chairman Emeritus R. Michael Shanahan, who helped his firm blossom into one of the three largest U.S. mutual fund companies and nurtured such startups as Advanced Micro Devices and Sequoia Capital, was presented with the prestigious 2009 Arbuckle Award by the Stanford Graduate School of Business Alumni Association on February 19.

In becoming the 39th leader to receive the award, Shanahan, MBA '65, explained to the audience how some of today's financial crises could have been averted if more people knew what his Stanford professors did four decades ago. He recalls learning that quantitative methods are not always ideal because some variables are difficult to quantify, making their statistics unclear.

"As one professor said, 'Use quantitative methods to develop insights, not to substitute for them.' That has held me in good stead for a long time."

Shanahan said Wall Street often was preoccupied with measurable statistics, looking at investment models rather than analyzing the details that could lead those investments to crumble. "Risk is, after all, a four-letter word."

In introducing Shanahan, John G. McDonald, Stanford Investors Professor of Finance at the Business School, described how Shanahan started as an analyst at Capital in 1965, then became research director in 1968 and started making venture capital investments in companies like AMD. McDonald said Sequoia Capital, a leading venture capital firm in Menlo Park, was incubated at Capital. Today clients of subsidiaries of the Capital Group Companies have assets of over one trillion dollars.

McDonald, who has known Shanahan since they were undergraduates, praised his friend's honesty, integrity, generosity, deep humility, and love of Stanford. The humility was particularly evident as Shanahan discussed his time at Stanford and his decision to work for Capital.

Shanahan explained how his service in the Navy after receiving his AB from Stanford in 1960 helped him appreciate what he missed in his undergraduate years. When he was a freshman in 1956, Shanahan recalled, he had a Navy scholarship and an appointment as an officer awaiting him after graduation, and he quickly realized that he needed to make only a modest effort to get his degree.

"I proceeded to invest the near minimum and missed a tremendous opportunity," he said. "Early in my Navy career, I discovered that many of my fellow junior officers had distinguished themselves more by what they had learned and the effort that they expended than by the name or the status of the college that they came from. It didn't take me long to see my mistake."

In late 1962, Shanahan decoded a message from the Bureau of Naval Personnel suggesting that because of developments in Vietnam, naval officers who normally should have the option to go into the reserves after three years of service - such as Shanahan - should be denied that option unless they planned to go to graduate school or got hired by a defense contractor. "So, you guessed it: I applied to 10 business schools and 10 defense contractors."

Shanahan had good reason to embrace his education far more once Stanford accepted him in the Graduate School of Business. Thanks to the efforts of the late Dean Ernest C. Arbuckle, after whom the award is named, the school had increased in stature. Shanahan said the class of '65 was among the first to benefit from Arbuckle's drive to recruit faculty and students, revise the curriculum, and provide intensive staff support.

"I needed all the help he devised," Shanahan said.

He recalled that the MBA program's focus was on business enterprises, but that Arbuckle stressed the importance of studying the people filling those jobs, rather than just the typical analysis of a job's function within the enterprise. "It was a revelation - not overwhelmingly popular, but overwhelmingly successful."

Shanahan said that without his experience analyzing processes and people at the GSB, he would never have considered working at a place such as Capital Research. But he realized that the work there would involve analytics similar to those he had studied.

"In all candor," he said, "I chose Capital because it was the easiest one to leave. My job was to go out and interview a bunch of companies and get to know their managers real well. I figured if I was any good, one of them at least would be willing to hire me if it didn't work out at Capital."

He never took the option. "I spent 44 years there," Shanahan said.

The Arbuckle Award, which recognizes excellence in management leadership, has previously been given to such people as former Secretary of State George Shultz, investor and banker John Scully, MBA '68. and longtime Intel leader Andy Grove, lecturer in business at the School.

"I am doubly honored to be included in a list of such distinguished business leaders," Shanahan said.

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Research - U.S. Dependence on Oil in 2008

Thu, 02 Apr 2009 23:06:59 GMT

U.S. Dependence on Oil in 2008: Facts, Figures and Context

Research by
Andrew Grove, Lecturer in Business, Stanford Graduate School of Business
Robert A. Burgelman, Edmund W. Littlefield Professor of Management, Stanford Graduate School of Business
Debra Schifrin, Case Writer, Stanford Graduate School of Business

STANFORD GRADUATE SCHOOL OF BUSINESS - In 2007 and 2008, the price of oil skyrocketed, hitting historic highs. The corresponding increase in gas price was felt sharply in the United States by ordinary people, industries, the military and the government. Citizens were spending more and more of their paychecks to fill their gas tanks, airlines grounded planes to avoid the high cost of fuel, and the military saw its daily price tag for the wars in Afghanistan and Iraq increase due to fuel costs. The U.S. military depended almost exclusively on oil to power its weapons and vehicles.

Economists the world over debated whether this sudden price jump was caused by supply and demand dynamics, market "speculation," or the weak dollar. In addition, debate intensified over whether the world was hitting "peak oil," - a time when global oil production capacity would plateau.

If strategy is about gaining and maintaining control of destiny through managing the balance between influence and dependence, the United States. faced an increasingly dangerous strategic situation in 2008. Although the nation. had traditionally been strongly influential in the oil industry, by 2008 it seemed that this influence had waned. U.S. oil production had been decreasing steadily since the mid 1980s, and the United States was losing clout as a customer as developing nations like China and India began buying increasing amounts of oil. As a result, the nation was potentially facing a situation of strategic subordination.

The strategic imperatives facing the U.S. in 2008 were 1) to gain more control of the forces driving the United States‘ increased dependency on oil, especially foreign oil, and 2) to take decisive action to significantly reduce dependency on oil as a major source of energy within the shortest possible time.

To develop a greater understanding of the strategic challenges facing the U.S. in 2008, Andrew S. Grove, Business School lecturer in management and emeritus chairman and CEO of Intel; Robert A. Burgelman, Edmund W. Littlefield Professor of Management; and Debra Schifrin, case writer and researcher at the Business School, authored a paper that complies the key facts and figures, as well as key contextual factors, to describe global and United States' energy and oil consumption, the history and evolution of the oil industry, the global oil marketplace in 2008, and the relationship between U.S. oil consumption and national security. The authors argue that this greater understanding will facilitate taking the decisive strategic actions that the situation calls for.

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Speaker Forum - Google's Schmidt

Thu, 02 Apr 2009 23:05:59 GMT

Google's Schmidt: 2009 is a Good Year to Be a New Graduate

Video Available at http://www.gsb.stanford.edu/news/headlines/vftt_schmidt.html

STANFORD GRADUATE SCHOOL OF BUSINESS - Google Chairman and CEO Eric Schmidt knows full well that the economy is staggering, that the job market is downright ugly, and a recovery is unlikely before 2010. But he also believes 2009 is a great year when it comes to one thing: potential.

"Change happens when things are hard," Schmidt said March 10 at the student-sponsored View from the Top Speaker Series at the Stanford Graduate School of Business. "The economy and the situation that we're in now will create phenomenal opportunities that are before each and every one of you. If you think about it, this is literally the best time to graduate in 50 years. Assets are cheap, and expectations are set realistically."

"The genius of the American system is that it corrects," said Schmidt, who advises the Obama administration on technology policy and the economy, and is a lecturer in strategic management at the Business School. "Whatever you think of the previous structure, it's just being corrected big time. And I mean big time. In one month, enormous aspects of our government are being redone."

He said technological changes should include making the processes of government, medicine, finance, and other critical areas of society more transparent. The changes should also include increasing the use of cloud computing, which employs the internet to allow computer systems to share applications, letting businesses reduce in-house information technology systems.

Assumptions have changed since many technology companies were founded, Schmidt explained. For example, Larry Page and Sergey Brin created Google on personal computers at a time when networks were less reliable than computers - unlike now - and smart phones and other internet-accessing devices were far less ubiquitous.

"Why did Larry and Sergey use PCs?" Schmidt said. "Because they were cheap."

Now internet access is cheap and widespread, and businesses rely on it far more, he said. "With cloud computing it's now possible to have the same apps at home and at work and still have the same level of security."

But cloud computing needs to evolve, Schmidt said. "When television first came out, the first shows were radio shows on television," which didn't take advantage of the visual medium, he said, adding that people are just learning how to take advantage of cloud computing's potential. If users allow companies to amass data on queries without invading privacy, for example, trends can be seen about everything from food preferences to pandemics.

"In Google, we can actually detect anonymously rises in queries because we centralize the servers," Schmidt said, "and then we can alert the health care professionals that we think that there is an outbreak of flu in their area and get them [involved]. The cycle is about six months earlier. This saves somewhere between 10,000 and 30,000 lives a year because we use that information to get people ahead of the cycle."

Instead of reading from textbooks, students could be assigned a set of queries, he said. Some would find information that would enthuse them, and they would become experts for their classmates. "You have all the information in one place and you have access."

Schmidt said transparency could also lead to a Wikipedia-like site for doctors to share information about which treatments worked and which didn't.

"Can you imagine if you had the same thing about the financial world? And we had been able to use that to monitor the things that happened over the past five years in the broad-based global financial industry? Think about how different we would be in terms of knowing where we are and what we have to do."

Congress would be more effective if the public could see changes to bills online, Schmidt said, adding that every public room could have a camera that streamed video live on the internet.

"The new idea," he said, "is that transparency is the best defense against bad decisions."

Having so much information so accessible leads to exciting applications, Schmidt said. He said Google's Android operating system in cell phones, for example, can take pictures of the buildings around you and use GPS to tell you a lot about each of them - and what goes on inside.

"All of a sudden, you've got a GPS and a camera and a supercomputer in your hand, backed up by all the world's data."

Another of his favorites: A product lets you scan the bar code of an item in a store, then tells you if it's cheaper online.

He talked about venture capitalist Bill Joy, who finds an area of interest, then looks up research papers about it. "He figures out who the two or three best authors are, and he calls them. And, by the way, these are people who no one ever calls, so they call him back. He talks to them and says: "What's the most interesting thing in your field?"

Amid his enthusiasm, Schmidt also realizes there are always people resistant to change, particularly companies afraid of competition. That resistance weakens during a recession, however, which is why he expects changes soon.

"Literally in the next year," Schmidt said. "That's how quickly."

The View from the Top Speaker Series is organized by students with the cooperation of the School's Center for Leadership Development and Research.

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News - February Issue of Stanford Business Magazine Online

Thu, 05 Feb 2009 19:16:08 GMT

Stanford Business School Magazine, February Issue Online
This issue features Dean Joss's decade of changing lives and the world through his leadership of the GSB, stories on alums who provide leadership to churches and railroads, faculty essays on the market meltdown, and, of course, class notes. Read Magazine Online

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News - Financial Times Ranks Stanford MBA #6

Thu, 05 Feb 2009 19:13:03 GMT

Financial Times Ranks Stanford MBA #6
FT survey of 2005 MBA alumni found GSB alumni in consulting, finance, and IT reported the highest salaries of all business school alumni polled. Details

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News - Business School Announces Budget Reductions

Thu, 05 Feb 2009 19:12:00 GMT

Business School Announces Comprehensive Budget Reductions

January 2009

STANFORD GRADUATE SCHOOL OF BUSINESS —In response to decreased endowment revenue, a projected drop in executive education revenue and expected alumni-giving declines, the Graduate School of Business announced a comprehensive expense reduction plan on Tuesday.

The declining revenue sources, triggered by a financial downturn of unprecedented reach and scale, have created a $15 million (10 percent) shortfall in the current year budget at the Business School. Moreover, impacts are expected to persist due to the effects of the recession on Business School revenues.

The endowment payout will continue to decline more over the next two years as the full impact of the decline in asset values is reflected in the payout. "We're essentially looking at an endowment revenue decline for three years," said Dan Rudolph, senior associate dean for operations.

Academic priorities were protected as part of the strategic budget process, including student programs, the new MBA curriculum introduced in 2007, financial aid, the Sloan Master's Program, faculty research and the school's PhD program.

As part of the plan to reduce expenses, 49 staff members (approximately 12 percent) were laid off. Another eight people were put on a reduced schedule, and 12 contractor or fixed-term positions were eliminated. Expenses such as travel, food, library services, marketing activities and printing, among other things, also were cut.

"This was the most painful decision I have had to make in my nearly 10 years as dean," said Robert L. Joss, dean of the Graduate School of Business. "We regret the need to lay off staff members who have been dedicated to the school and its educational mission, but by cutting expenses now we can ensure our long-term financial health. Every effort will be made to support employees as they transition out of our workforce."

Laid off staff members will receive an enhanced university severance package, as was previously announced by the campus for all employees who may be laid of between now and June 30. The affected employees also will receive severance based on length of service and five months of outplacement job search support, as is standard campuswide. Outplacement specialists were at the school on Tuesday to provide information and support as employees learned of their layoffs.

Overall, Stanford University endowment results are expected to be down between 20 and 30 percent this year, according to estimates from Provost John Etchemendy. By contrast, during the 2001-03 downturn, the Stanford endowment was down about 5 percent over two years. The Business School has been especially hard hit, as a larger proportion of its revenue comes from the endowment and alumni giving than in some other areas of the university.

With these cuts, the Business School has put a plan in place to ensure future financial stability. In a Jan. 7 Q&A in Stanford Report, the provost said that it is important to remember that even with a 20 to 30 percent investment decline, the university's endowment would be about the size it was in 2005. It was a great university then and it will remain a great university in 2010, he said. The same is true of the Business School, Joss said.

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News - Alumni in the News - Jim Thompson, MBA '86

Thu, 05 Feb 2009 19:10:56 GMT

Community Sports: Pacific Ridge Finds Positive Coaching Alliance Philosophy a Good Fit
"It's about the development of the student athlete, rather than win at all costs,” said the Pacific Ridge Director of Athletics about the Positive Coaching Alliance philosophy started by Jim Thompson, MBA '86, and director of the Stanford GSB Public Management Program from 1987-1998. North County Times, January 7, 2009 Details

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Research & Ideas - Acquiring Power Motivates People to Act

Thu, 05 Feb 2009 19:08:42 GMT

GSB Professor Deborah H Gruenfeld

December 2008

STANFORD GRADUATE SCHOOL OF BUSINESS - In the wake of Barack Obama's "yes we can" victory, a timely study has emerged from the Stanford Graduate School of Business about what motivates people to take action. The prime mover, say researchers, is acquiring a position of power.

Specifically, it is people's new, more elevated perception of themselves after assuming a position with more power that inspires them to take more risks and pursue goals more confidently. Taking on a formal position of power - be it managerial, political, or cultural - gives people the illusion they have more control over their organization and their world, which, in turn, can propel them to go for the gusto. In the best-case scenarios, this can lead to achieving unimaginable accomplishments. In the worst, it can lead to poor decision making and devastating losses.

In one study, researchers stimulated thoughts of empowerment among a group of participants by having them describe in writing a time when they had power over others. Another group was asked to write about a time when they were not empowered. Researchers then measured participants' mindsets by asking them to predict the outcome of a roll of a die. Participants' choice either to roll the die themselves or have another person roll it for them served as an indicator as to whether they were feeling confident or not in the moment.

"When people feel they can control the outcome, they want to roll the die. It's a classic measure of the ‘illusion of control,'" explains Nathanael Fast, a doctoral candidate in organizational behavior at the Graduate School of Business, who conducted the study with Deborah Gruenfeld, Moghadam Family Professor of Leadership and Organizational Behavior at the Business School; Niro Sivanathan of the London School of Business, and Adam Galinsky of Northwestern University. In this experiment, 100 percent of the "high power" group chose to roll the die themselves, as opposed to only 58 percent of the "low power" group. "This shows that power boosts people's sense of control over outcomes, even when the outcomes are based entirely on chance," Fast says.

In a second study, one group was assigned to the role of manager, another to the role of subordinate. All participants were told they would do a role play, but first they were asked to complete an unrelated activity that involved reading about an organization and rating how much control they thought they could have working in that organization, as well as how optimistic they were that the organization could do well.

Those designated as managers were significantly more optimistic about the organization in the material they read; they thought they would have more control over the organization's fate than those in the subordinate group. "People with a position of power believed they could control outcomes that stretched beyond their actual power," says Fast.

This finding may explain why CEOs sometimes make over-optimistic decisions, such as paying too much for mergers or acquisitions. "Because of the illusion of control that their role gives them, they may tend to overestimate how much influence they will have in turning such transactions into huge profits," Fast observes.

In a third study, participants were again primed by being asked to write about situations in which they had been either empowered or disempowered. They then took a self-esteem test and were asked questions such as whether they would vote in the next election, to what extent they thought their vote would affect the outcome, and how much influence they believed they had over the national economy.

Participants who were primed for power had much higher self-esteem scores and a much greater illusion of control than those primed for disempowerment. They were more likely to say they would vote and that their actions could have an impact on the world.

The investigators ruled out the argument that mood drives people to act. They found that "happiness" levels were similar regardless of which group they were in. "It's because power gives people a sense of control, not happiness, that it inspires more confident action taking," he said.

"One implication of this work is that powerful people shape our world not just because they have resources, but because they believe they can shape the world -- and therefore they try," says Fast. "People with low power mindsets do less than they otherwise could."

Because those who believe they are empowered are more active and productive, managers may want to create more confident employees by giving them a say in their organizations, he suggests. On the other side, leaders need to caution against over confidence. "When someone takes on an air of invincibility after being promoted to a more powerful position, the effects on an organization can be devastating," says Fast.

What is required, he suggests, is a system that ensures critical thought. "Research shows that carefully evaluating the pros and cons of a decision tends to reduce the illusion of control," he says. Instituting mechanisms that require deliberation is the key to preventing snap decisions by CEOs with little time and big egos.

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Hot Topic - Economic Instability and Solutions

Thu, 05 Feb 2009 19:07:50 GMT

Economic Instability and Solutions

Financial Restoration for the United States
GSB Professor Emeritus Van Horne offers a set of reforms to reduce systemic risk in the financial services industry and save taxpayers money in the process. Details

Achieving U.S. Financial Stability
GSB Professor Darrell Duffie argues that redesigning the U.S. financial system after the current crisis will focus on creating stability. "Most of us thought we had it, but we did not." Details

Containing the Credit Crisis Video
Stanford GSB Professor Darrell Duffie participates in a panel discussion on the ongoing credit crisis. Duffie focuses on financial markets and derivatives.
Containing the Credit Crisis Video (66:37 minutes)

Solutions and Predictions Offered at Forum on Economic Crisis
Economists, including Stanford GSB faculty members Darrell Duffie and Mark Wolfson, and Anne Casscells, MBA '85, took stock of the world's gloomy financial situation during an Alumni Weekend panel discussion. (Video available) Details

Incentives and the Financial Crisis
In any financial crisis, it is possible with 20/20 hindsight to identify the specific causes. Rather than outlawing those activities, GSB Professor Jonathan Berk recommends designing legislation that better aligns the incentives of bankers with the public interest. Details

Stanford, GSB Professors Debate Bailout Plan
Panel discussion ran the gamut from how the U.S. got into this mess; how this crisis fits in with past credit crises; and whether the financial sector is really sufficiently "different'' than the rest of the economy to warrant a $700 billion rescue courtesy of the American taxpayer. Details
Credit Crisis and the Bailout Video (57:56 minutes)

Jackson Library Hot Topic: Financial Crisis and Bailout
Jackson library provides full-text news, research articles, and books that highlight current hot issues. Details

Depression Babies: How Our Economic Experiences Affect Investment Behavior
GSB Professor Stefan Nagel has demonstrated that personally experiencing something like the Great Depression has a significant impact on how we invest our money. Details

Just Hearing About a Stock Bubble Won't Keep Investors Out of Trouble
Investors who lived through the dot-com bubble are unlikely to forget it. But those who didn't experience it will probably not learn from history, says GSB Professor Stefan Nagel. Just Hearing About a Stock Bubble Details

How Dividends Encourage Consumer Spending
Consumers are likely to run out and spend stock dividends, while income from capital gains is more likely to be reinvested or saved, says the GSB Professor Stefan Nagel. Details

Government Testing Ways to Avoid Foreclosures, Says HUD Secretary Preston
Steven Preston, US Sec'y of HUD Preston offered an eager Stanford audience an insider's perspective on how bad our economic problems are likely to get, and what the government is doing about it. Details

Time to Solve Problems in New Ways Video (53:07 minutes)

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Speaker Forum - Today's Market Behavior Shouldn't Be a Surprise, Says Joseph Stiglitz

Thu, 05 Feb 2009 19:03:15 GMT

January 2009

Video Available at http://www.gsb.stanford.edu/news/headlines/Stiglitz09.html

STANFORD GRADUATE SCHOOL OF BUSINESS - Like a pathologist who examines cells and tissue to determine what ails the patient, economist Joseph Stiglitz has been dissecting the U.S. economy to find out what caused its spiral into recession.

The Nobel prize-winning economist admonished regulators and Wall Street for not paying enough attention to the lessons of history during a speech before almost 200 students Jan. 22, at the Stanford Graduate School of Business.

"The Great Depression led to new insights into how periods of unemployment could persist and led to the conclusion that markets are not self-adjusting," he said.

Yet the idea that something might be wrong with unchecked free markets was forgotten during the tech bubble and the housing bubble that saw high employment rates. "It raises questions: are markets as efficient and innovative as market advocates claim?"

Stiglitz, now a professor at Columbia University, in 2001was awarded the Nobel Prize in economics for his analyses of markets with asymmetric information. Sharing the honor were former Business School Dean Michael Spence and George A. Akerlof of the University of California, Berkeley. The threesome's idea was that the "invisible hand" of the market cannot always be relied upon to get prices right.

They proved markets aren't always fully informed. "The invisible hand often seems invisible because it's not there," Stiglitz said. "Markets are not totally efficient."

In this recent economic crisis, financial markets misallocated capital and mismanaged risk, he said. The notion that allowing people to take on more risk propels the economy forward didn't work.

Stiglitz excoriated lenders for selling mortgages that pushed homeowners into taking risks that set them up for failures, such as negative amortization loans. "The more you borrow the richer you'll be?" he asked incredulously. And mortgages offered to people who clearly couldn't afford them? "Giving away money to low-income individuals is usually not the standard business model for most banks."

Wall Street and regulators didn't pay attention to economic fundamentals during the housing boom, he said. "Americans' income was going down as the price of housing was going up. Eventually you were going to run into problems."

The United States exported some of its toxic mortgages; had it not sent some of them to Europe via complex securitization, its downturn would have been far worse, Stiglitz wrote in Newsweek late last year.

He likened bundling bad products (low-rated securities) into good ones to create profitable products, to turning lead into gold. "The problem was one of intellectual incoherence. They created new products to transform financial markets yet based the risk assessment on data from before the creation of new products," he said.

Along with financial markets that misallocated capital and transferred risk to those less able to bear it, Stiglitz blamed the economic crisis on the failure of regulators to act to stem spendthrift patterns. "There was a party going on and no one wanted to be a party pooper." But along with bad lending and bad monetary policy, there were three other contributory factors at the corporate level: poorly designed incentives, inadequate compensation and nontransparency into accounting policies and products.

He called for fundamental reform, starting with the banks that have received federal bailout funds being forced to sell foreclosures that give homebuyers a fair chance. Changing the current situation where imports exceed exports is the only way to address reform globally, he added.

Long-term, he was pessimistic about some of the steps the U.S. government has taken to stem the downturn, such as injecting capital into the banking system. "It's very worrisome that some of the ways we are getting out of the crisis is exacerbating the problem. Making banks bigger should make us uneasy," he said. And making the Federal Reserve, whose balance sheet has risen to $3 trillion from $800 billion, the lender of first - instead of last - resort is "deeply troubling to our political and economic processes."

More recently, Stiglitz has written several opinion pieces arguing that tax breaks for business - except when closely linked to additional investment - shouldn't be part of a stimulus package. What's needed, he told the audience, is "regulatory change in incentives so those in the financial markets don't engage in the same bad behavior."

Stiglitz' appearance was as part of the Business School's Global Management Program's Global Speaker Series. His most recent book is, The Three Trillion Dollar War: The True Cost of the Iraq Conflict, co-authored with Linda Bilmes.

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News - State of the School, Fall 2008

Thu, 08 Jan 2009 16:35:00 GMT

From the Dean - State of the School, Fall 2008

Dear Friends,

Just a few weeks ago at our October Alumni Reunion Weekend, nearly 600 alumni, faculty, staff, and students gathered under a tent at the site of our new campus to celebrate our First Night at Knight and mark the beginning of construction. The scale of this project is significant. A collection of eight buildings around three quads, to be known as the Knight Management Center at the Stanford Graduate School of Business, will be the home of the School for the 21st century. This enormous undertaking is the culmination of five years of planning by alumni, staff, faculty, and students. When the campus opens in the 2010-2011 academic year, it is expected to achieve the highest LEED Platinum certification for environmental sustainability from the U.S. Green Building Council.

"Our university is hallowed by no traditions, it is hampered by none.
Its fingerposts all point forward."
David Starr Jordan, the first president of Stanford University, speaking to the pioneer class on opening day in 1891 State of the School.

As a school whose mission is to provide insightful and principled leaders for the future, we believe it important to teach leadership and demonstrate it in the all-important area of energy and environmental resource management. This idea of teaching leadership both in the classroom and by example is a University-wide objective set by Stanford President John Hennessy. And you, our alumni, played an important role in inspiring us to stretch for the highest possible sustainability as we undertook this grand new project.

Innovation and Leadership
When I arrived as dean in 1999, I never could have imagined how much we would accomplish through the creativity of our faculty, staff, alumni, and students. I believe we are at a defining moment in the School's history. When future generations look back on this first decade of the century, I hope they will see that we laid the foundation for teaching and learning for an increasingly fast-paced and integrated global economy and for the team-based, cross-cultural nature of management that will characterize the years ahead.

The new Business School campus is a bricks-and-mortar symbol of our commit-ment to the future. Indeed, it will provide the needed infrastructure for innovative learning. But another example of that commitment to the future is our new curriculum: This year we will graduate the first class to complete the new MBA Program. Our faculty initiated and developed a program that is more personalized, with more global content and more leadership development than ever before.

It redefines management education and is designed to help students engage with their learning as it inspires them to become innovative and socially responsible leaders. The new campus offers more flexible space for seminars, small classes, and the leadership exercises that are hallmarks of the new program. The feedback I hear most often from alumni is, "Wow! I wish I could come back and do the program again."

One of the best received features of the new curriculum has been the Critical Analytical Thinking class, required of all first-year students. In this seminar, students don't simply read a case and make a clever chip shot from the skydeck in discussion. Rather, it pushes students to think deeply and to develop, hold, and articulate a position as part of a group of just 16 people who perform as they might have to in a work team or on a board of directors examining a difficult long-term issue.

We continue to refine the new curriculum. We are creating the Synthesis Seminar for second years that will stress integrative thinking skills and personal reflection about their futures. And, after feedback from students, we retooled the required Global Context of Business course to include more operations content and new cases like Hyundai, the globalization of NetApp, and Taobao vs. eBay China.

This year we anticipate 23 study and service-learning trips as part of the MBA global experience requirement. In addition to student learning, these trips provide a new avenue for faculty access to corporate contacts, new case subjects, and global datasets—a critical ingredient for quality research. After a service-learning trip to Guatemala during last year's winter break, organizational behavior Professor Jesper Sørensen developed "As Green As It Gets," a case on the entrepreneurial efforts of a group of coffee farmers. Similarly, organizational behavior Professor Hayagreeva Rao returned from a faculty trip to China in March 2007 with content for a case on leading a family business, now the subject of one of our Executive Education courses.

Community
A hallmark of the Stanford Business School experience is its close community. This past summer alone, we organized 33 student-alumni events around the world, double the number of the previous year. More than 40 percent of our alumni generously supported the School with gifts last year. And so many have shared time and talent through applicant interviews, mentoring, and other activities.

Our small student-body size encourages a strong network—one that continues through their alumni years. We saw this effect last fall during the record-setting reunion celebrating the 50th Anniversary of the Sloan Master's Program. We also have seen students bond with each other and with faculty in seminars, during student trips, and through the myriad social activities that fill any given week on and off campus.
So that all of you, wherever you might have been in the world, could participate, we webcast the First Night at Knight celebration I mentioned earlier. The web program was hosted by Tad Glauthier, MBA '02, and I urge you to look at some of the video interviews from that broadcast, including comments from our architect, faculty, students, and the University's executive director of sustainability. You will find the entire program at: www.gsb.stanford.edu/knightcenter/firstnight/index.html

Our campus community was greatly tested a few weeks ago when three of our students died in a car accident near Big Sur. Losing such promising young people, who would have done so much good in the world, was utterly painful. Yet as this tragedy unfolded, I witnessed the closeness of our students: More than 200 of them gathered in the Schwab Residential Center within hours of learning of the accident, and a few days later they marched in unison to a memorial service where their ability to support one another was palpable. I also saw the compassion displayed by our faculty and staff, and the support of the greater Stanford community. It is sometimes in the darkest hour that one sees and appreciates the true value of one's community.

Collaboration
Forging bonds within Stanford University to encourage greater collaboration continues to be a strong element of our vision. We have added two new joint degrees—in environment and resources and in public policy—to the School's existing joint degrees in law and education. Faculty continue to offer a four-week Summer Institute for Entrepreneurship for non-business graduate students. As a result, the leadership impact of the Business School has been greatly magnified today, and in the future we expect it to benefit many generations of students from the GSB and elsewhere at Stanford.

I continue to believe firmly that management is a noble calling, as important as medicine, education, or the law. Most people around the world either work in or have their lives impacted by managed organizations. Individual livelihoods, community quality of life, stock prices, and city tax revenues depend on how well those organizations are managed. With the turmoil in the financial industry and in markets around the world, it is obvious there remains a critical shortage of managerial leadership in both developed countries and in burgeoning economies like India and China. I have never had a greater appreciation of the Business School's relevance and importance to modern society.

Always Looking to the Future

This makes our mission all the more important. I think it is fair to say that the state of the School with its new curriculum, new campus, and strong alumni support has never been better. With my second term expiring next year, I announced in September that I would step down as dean at the end of this academic year. I will have been dean 10 years. As Ernie Arbuckle put it when he finished his deanship in 1968, it is good for the individual and the institution to repot every decade—allowing new leadership, energy, and innovation to emerge. The provost will soon announce a search committee for our new dean.

As Stanford's first president, David Starr Jordan, said on the University's opening day, "Our university is hallowed by no traditions, it is hampered by none. Its fingerposts all point forward." We are creating leaders for the 21st century. I hope that you will continue to support our endeavors in my last year as dean and in the years to come.

Sincerely,

Robert L. Joss
Sloan '66, MBA '67, PhD '70
Philip H. Knight Professor and Dean

GSB Highlights

Will graduate first class to complete new MBA curriculum in June 2009
Began construction on the new 360,000-square-foot, environmentally sustainable Business School campus to be completed in 2010-2011.
Forged important bonds with other schools within Stanford
University to encourage greater collaboration among students and faculty. Two new joint degrees, the MS in Environment and Resources/ MBA and the Master of Public Policy/MBA, were added to the School's JD/MBA and the MA in Education/MBA.
Renewed and expanded efforts to recruit world-class research and teaching faculty to the Business School, including the addition of an associate dean for faculty recruiting and retention.

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