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Week 17: Economists Designing Orgs, Ethos of Problem-Making and Sick Bush in Japan

November 11, 2012

Stanford GSB Sloan Study Notes, Week 7 (17), Autumn quarter

This week will go down in history as the one that finally saw the portfolio of profiles of every single Fellow of the Stanford Sloans class of 2013 hit the public interwebs. Please meet my lovely class in its diversity, internationally and otherwise.

On other news, Americans re-elected Obama for their President (aka POTUS – didn’t know that one before) on Tuesday, which in the fair state of California sounded more like a sign of relief. And I, in turn, spent far too much time on Estonian blogs, chats and Facebook threads, tracking an insane sequence of judgement lapses by some party politics leaders back home. Between these two parallel world, I could not have had a better week to start a new class, Political Communications: How Leaders Become Leaders taught by a very experienced practitioner in the field, David Demarest.

Covered in this issue:

  • Why calling taxes “revenue enhancement” works
  • Why globalization and CxO executive titles should be taken less for granted than people think
  • How the classic forms of political communications, a speech and a debate, are constructed by the best
  • How 20-30 year old experimental art tends to turn into everyday products eventually
  • Necessary evils around good old software development: intangible assets, intellectual property, patents

GSBGEN378 – Decisions About the Future (Hardisty)

  • Fast & Frugal Decisionmaking: “Take the Best” (Gigerenzer)
    • create a cue list and scan for the first finding that discriminates between objects
      • prioritized (stop at first match)
      • keep going down the list to score points
    • example: cues (does it have a train station, football team in first league, etc) to find out of München is larger than Dortmund
    • “formalizing intuition”
    • useful in heuristic search, replicating decisions at large scale
    • saves “cognitive energy” IF that is the goal (supermarket choice VS life & death decisions)
  • Confirmation bias test/example:
    • Albert is: intelligent, industrious, impulsive, critical, stubborn, envious
    • Bob is: envious, stubborn, critical, impulsive, industrious, intelligent
    • Whom do you prefer?
  • Attribute framing:
    • People pay more for “75% lean” than “25% fat” (Levin & Gaeth 1988)
  • The Quayle Conjecture: “Our party has been accused of fooling the public by calling tax increases ‘revenue enhancement’. Not so. No one was fooled.”
  • Query Theory (Johnson et al, 2007)
    • proposes that preferences are constructed (rather than pre-stored and immediately available) as answers to internally posed questions
    • series of mental queries for and against each option

STRAMGT279 – Global Strategic Management (Roberts)

  • Reason for rise of Canon &  copier makers over Xerox: as there were no kanji typewriters, there was much higher demand in Japan for copiers in every office (vs Xerox’ focus on larger, high-performance machines)

  • Organizational design topics are moving from Organizational Behaviour field (more experiential) also to economics (more theoretical)

    • Susan Athey, Economics of Organizations papers, incl with Roberts 2002
    • Centralization vs decentralisation (Alonso, Dassein & Matoushek, Rantakari 2010)
      • key issue: “strategic information transmission” (exaggerating your interests)
      • any solution is extremely complicated

  • Transferring resources across business units

    • always lowers performance pay, unless there are aligning incentives on total pay
    • Friebel & Raith 2006

  • BU-based (M-form) versus functional (U-form) organisations

    • historically has been moving U -> M, to reduce CEO overhead
    • M gives better performance measures for middle managers
    • comparability between different middle managers (between BU-heads VS sales managers to product managers?)

  • Matrix structures

  • Average C-suite executive team has grown 60% (~6->9..10) in US in 15 years

    • COOs are disappearing

  • Terms global(ization) often used undefined, several dimensions:

    • Economic: higher %% of activity crossing borders, (import+export)/GDP
    • Market (buyers): more similar tastes, harder to differentiate on price
      • DRAM, crude oil..
    • Industry (suppliers): to which extent are one industry’s competitors in major markets same firms?
    • Firm

  • globalisation is NOT as “sure thing” and unavoidable trend as it looks like today

    • don’t be fooled by looking at change in your lifetime
    • 1890 to WWI the world was very globalised in current terms
      • no immigration restrictions
      • British colonial control meant free tread in most of the world
    • dominant economy tends to be strongest proponent (see US->CN power shift now)

  • “Benefit of monopoly is the quiet life. How do you stay hungry with 98% market share?”

  • “Positional advantages often don’t travel”

  • Administrative/institutional distance: think outside usual patterns

    • few Americans/Europeans consider (or even see) collusive solutions because they are illegal back home
    • fine to not go along, but make a conscious decision to do so

  • To avoid costs of localising to each country, assemble aggregates, “regions”

    • can aggregate on any CAGE dimension!

  • P&G defining market segments between markets: mass -> masstige -> prestige

GSBGEN565 – Political Communications (David Demarest)

  • Brand is a promise
    • variations for exact constituencies OK
      • Stanford: good education for students, good neighbour for Palo Alto
    • … as long as they do not conflict with each-other
  • Head of Communications
    • maps and understands the entire portfolio of promises made
    • is (proactively) on lookout to avoid breaking them
    • manages the crisis if promises get broken
  • “You get me the pictures, I’ll get you the war” – Hearst
  • Flip-flopping is more tolerable to the public if “flop” is in the more popular position
  • New tech/media
    • creates immediacy pressure for campaigns to jump in to “own the conversation” ahead of opponents – often without actually being equipped (with facts, analysis) to do that
    • can not segment messages any more
  • Nixon’s Checkers Speech
    • Videos and transcript
    • classic structure: Information -> Argument -> Motivate behaviour
    • excessive detail -> “who would make all this up – must be true”
    • triggered 300,000 telegrams to the party office, 300:1 supporting him
    • activated a precisely targeted anti-communist audience, media’s panning of the speech didn’t matter
  • In execution sequence (research -> strategy -> tactics -> …)
    • no next step can exceed the quality of the previous one
    • can’t have world class strategy on merely “adequate” research
  • US Presidential race
    • only a few moments to change momentum: primaries, party convention, debates
    • beyond this, only international crises or natural disasters – neither which you control
    • 60 days from convention to election day:
      • nightly gut check: who won today?
      • 30 days are a “wash”
      • out of remaining 30, is it 20:10 or 14:16 by election night?
      • high correlation to actual result
      • disasters effect: Sandy took several days off Romney’s plate, allowing Obama to be more President than candidate
  • Can not define a narrative outside any credible track record
    • A pacifist doing a photo shoot in a tank is only producing material for opponents anti-campaign
    • Validators and violators to narrative
    • John Kerry “reporting for duty” (video: http://www.youtube.com/watch?v=4AcC_JeMnc0) legitimised the debate around his questionable military background
      • don’t provide the opponent an avenue for attack
  • Same dilemma when _responding_to attacks
    • response validates attack, yet beyond a tipping-point, non-response is more damaging
    • test: which segments are actually torn? if only your core opponents (who wouldn’t support you anyway) are behind – ignore
  • Bush Senior’s “Read my lips: no new taxes” fiasco
  • Framing the message
    • Your objectives vs audience objectives
      • eventually the latter prevails
      • credibility and relationships bridge the two
    • Compelling message: attractive, actionable, concrete, consistent, detailed, …
    • Working against: complexity, vagueness, inconsistency…
    • and …competitors, adversaries, noise, intertia
  • Being an underdog is a licence to be more aggressive
    • yet, positioning yourself to be an underdog is too risky – people will easily think you are one
  • Incumbent’s counter moves
    • leading: “you will hear a lot of criticism”
    • admit to things you can not disown anyway
    • make “being in the arena” a virtue challenger can’t copy
  • Electoral education is an issue in US
    • 50% of K-12 graduates need supplementary help to continue in college
    • changes campaign dynamics & public debate quality
  • Main blocker for 3rd party entrants to US: electoral college system
    • You don’t need to win some mindshare, but entire states
  • New entrant risks are much higher
    • Public is still filling in the blanks: if this is a blunder, it will define you
    • Example: Howard Dean‘s scream
    • If you are well known (e.g. incumbent President), it will just redefine a small subset of what people know about you
    • “Binders full of women” very late in campaign hurt Romney less
  • Only mitigation: rich and deep understanding of your own narrative
    • avoid quirks that contradict positive or emphasise negative parts of the narrative
  • Bush vomiting incident at a State dinner Japan
  • Pool reporting – subset of press delegation covering parts of a trip & sharing with everyone
    • prone to interpretation and mistakes
  • Leaders’ attitude to scripting/stagecraft is based on personality, etc – but also irrational reasons (ex: predecessor was doing it “too much”, so I will not)
  • Book: Lend Me Your Ears: Great Speeches in History, Updated and Expanded Edition by Safire
  • Attacking age (too old of young)
    • Reagan in response to an attack on his old age: “I will not make the age an issue in this campaign. I will not attack my opponent on his youth and inexperience.”
    • Clinton: “I don’t think Sen Dole is too old to be the President. It is the age of his ideas I’m worried about…”
  • Pork barrel spending – earmarking money for your district/state directly in the budget
    • Stanford has a policy not to accept any, but always compete for public funding
    • ~$18B in US
  • Characteristics of a strong argument:
    • predisposition to audience
    • relevance to conclusion
    • believable
    • immediacy
    • certainty
    • credibility
    • connected to your Big Idea
  • Order of arguments
    • chain of arguments (NB! weakest link)
    • from more -> less familiar (build on the known)
    • from cause -> effect, problem -> solution
    • chronological
    • compare & contrast
    • research shows first & last are equally memorable (just never put your strongest point in the middle)
  • Politifact – fact-checking politicians claims
  • Defining moments
    • relevant to narrative
    • extractable (can be understood as a soundbite, without context)
    • conspicuous (obvious to people present that that was the one)
    • these 3 criteria unfortunately more likely to be fulfilled if the moment is negative…
  • CIA/FBI security checks are alpa bout “does anyone have _leverage_over you?”, not “have you smoked pot in college”
  • Crisis management is about getting your story to a descending trajectory
    • “just enough” confession that doesn’t sound like fully coming clean ascends/prolongs the story
    • public keeps digging and celebrates every new nugget even more
  • Cultural affinity influences belief in facts
    • whatever “my candidate” says sounds more believable than opponent / independent experts
  • Nixon to speechwriters: “give me the title of the reporting we’ll see in media after my speech”, ahead of writing the speech
    • focuses writers on core messages
    • writers will be held accountable later: was this what the media ended up reporting?
  • Speech presentation modes
    • read it – stale, boring, insincere-looking
    • adapt from text – most people should aim for the middle
    • wing it – very few people actually can pull off a coherent, structured, non-reperitive flow for 20+ minutes
  • “Comedy is the convergence between benign and violating”
  • Common speech structure trios
    • past/present/future
    • home/abroad/how we bridge
    • problems/options/solution
      • options: do nothing, nuclear war, the option you want
    • structure can actually stimulate good content
      • when you need to do a speech with no head notice: start with a fixed structure like “10 things I’ve learned about…”?
  • if you cannot reduce the point of a speech to a sentence/paragraph, there probably is no point
  • Figures of speech
    • anaphora – repetition of same words at the beginning of successive phrases
    • allegory – an extended metaphor
    • alliteration – a sequence of words with same starting letters/syllabi
    • antistrophe – “ask not what your country can do for you…”, “not all victims were Jews, but all Jews were victims”
    • epistrophe – like anaphora, but at the end of sentences: + “my opponent says no, I say yes”
    • hyperbaton/anastrophe – reverse normal order in which words lie
    • hyperbole – classic: Judge Noah Sweat’s “Whiskey Speech”
    • imagery – not just for illustration, but to push out the mundane worries of the day from listener’s head and get through with your point
    • metonym – substitution of a simpler word for larger concept, “pen is stronger than sword”)
    • parallelism – giving a whole a definite pattern by similar form of the parts, “the inherent vice… the inherent virtue”, “veni, vidi, vici”
    • peroration – forceful conclusion, punch line
    • simile – a direct comparison, “fights like a lion”, “flops like a fish on a line”

ACCT219 – Financial Accounting (Guttman)

  • Intangible assets
    • tend to be fairly unique – no simple market value available
    • acquired externally
      • with finite life (most): amortise
      • indefinite life: test annually for market value and impair if needed
    • developed internally
      • immediate cost
      • only exception: software development can be capitalised
  • Goodwill: non-identifiable assets, the “ultimate intangible”
    • can’t be traded separately, only as part of acquisition of controlling interest in a business
    • under GAAP used to be amortised over 40 years, today under impairment test
    • can’t be valued up
  • Reporting of M&A purchase price allocation is not standardized

CS547: Human-Computer Interaction Seminar

Note: full archive of videos for this course available here.

Guest speaker: Eric Paulos, UC Berkeley – Hybrid Assemblages, Environments & Happenings

  • Design Research: “Ethos of problem-making” (as opposed to problem solving ethos of Design process)
    • make us think (vs make us buy)
    • design for debate
  • The following are just shorthand quick notes – each and every one is worth googling separately!!
    • Jabberwocky – encountering familiar strangers
    • Aspen Movie Map, Michael Naimark 1978 – a Laserdisc-based prototype 30 years ahead of Google Streetview
    • TXTMob, Institute for Applied Autonomy 2004 – Twitter inspiration
    • Exploration in Lethal Experimentation 1997
    • Legal Tender 1996 – damaging US currency over the internet: when does it become a criminal act, and for whom?
    • Maker movement is “the raise of the expert amateur”
    • Manifesto of open disruption and participation
    • Living environments lab

CS207 – Software Economics (Wiederhold)

  • Patents provide federal protection, but invention becomes visible to everyone
    • Device patents (for visible ideas)
    • Material patents (analysable stuff: glue, drugs)
    • Business patents (hard to assure they represent new findings)
    • Limits: genes, stemcells, …
  • Patent bundles – 100s needed for a modern product
    • Negotiations with all owners = costly overhead and royalties
    • Alternative: standards-specific patent organisations (UMTS for 3G)
  • Copyright protects source code and chip masks, but not the underlying ideas
    • Automatically derived code (binary versions) are protected, even if they differ
  • Trade secrets are… secret.
    • Need a lot of contractual protection enforcement and US legal framework is State level, not federal
    • Roman law: actio servo corrupti (bribery, kidnap of servants/slaves to divulge secrets)
    • Supported by agreements: NDA, invention assignment, non-compete
    • Patent invalidates any previous trade secrets by definition

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