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Weeks 18-20: Innovation Economy, Debate Blunders and Creative Computing

Stanford GSB Sloan Study Notes, Week 8-10 (18-20), Autumn quarter

Not to worry, despite of the three week scope in title this is not a monster-length post. Between a lovely wedding, an unexpected funeral and Thanksgiving break in between my focus has temporarily shifted a bit away from school as this quarter concludes. Do enjoy the little there is to share below – and as special gift to reader A.M., yes there are more videos.

Marc & Bill

A notable off campus educational highlight  last week ago was an event at A16Z where  William Janeway (being interviewed by Marc Andreessen on the photo above) discussed his book Doing Capitalism in the Innovation Economy: Markets, Speculation and the State. Combining his 40 years in venture capital with a PhD in Economics, Bill has great insights into when, how and where governments should play any role financing tech innovation and where progress should be left for markets. And as a curious subtopic – the need for an occasional bubbles in the latter case.

Covered further in this issue:

  • How to avoid small groups polarizing towards extremes in debate
    • Kõrvalmärkusena Eesti lugejaile: jah, teadus teemal Reformierakond VS Väike Grupp!
  • Centralization VS distribution of control in global organizations
  • More history of Presidential candidates screwing up in public
  • Financial ratios and common size reports in accounting
  • Effective networking tips’n’tricks exchange with Sloan classmates
  • How computing changes human bodies and the definitions of creativity
  • How big internet players have changed hardware IP value chain

GSBGEN378 – Decisions About the Future (Hardisty)

  • What would Jesus drive? – a campaign angle to get the Bible Belt folks thinking about perceptionally leftist climate issues
    • Attribute scaling issue in US: 12->14MPG saves more gas than improvement from 28->40MPG!
    • “Sales comparison oriented” MPG is not intuitive measure for consumers to understand actual gas spend (vs European l/100km)
  • Integrative approach to decision making research
    • Mix of economic, psychological, anthropological methods
    • “Objective, subjective, collective”
    • Disciplines feeding into each-other iteratively
  • Contingent valuation (Schkade)
    • “existence value” – assigned to items without immediate personal utility, for ex polar bears
      1. how much would you give to keep polar bears from going extinct?
      2. would you prefer getting $1M or polar bears not going extinct?
    • interestingly, common answer zero can either mean worthless or priceless
  • Participatory process
    • Involving stakeholders in decision making can improve information gathering (Fraser)
    • Also serves extra-decision goals (Peterson 2010)
  • What’s up with that – climate change sceptic blog
  • Group polarisation
    • The Law of Group Polarization (Sunstein)
    • The org structure needs to be well tuned – just diversifying enclaves might actually kill the voice of the weaker subgroups
    • Solution: encourage enclaves BUT create a regular feedback/checkin loop with the larger, more diverse group (society)
    • (Yet unpublished) research by Hardisty shows the polarisation that happens over face to face happens over video calls, but does NOT happen over group IM chat
  • Normative Theory of Sequential Decision Making
    • Solution:
      1. Estimate the number of candidates you can interview
      2. Reject the first 37%
      3. Accept the next candidate that is better than all previous candidates
    • People tend to stop their search too early (Seale & Rapoport 1997; Rapoport & Tversky 1970)
      1. Potentially because they are working on pre-established baseline (don’t need to look at the first 37% options to create one)
  • Choice bracketing
    • Broad bracketing: assessing the consequences of all of them taken together
      1. The more yogurt consumers buy at once, the more rare flavours they buy (Simonson & Winer, 1992)
      2. Assigning value to optionality? Purchasing a hypothetical “future self” who could have changing tastes?
    • Narrow bracketing: making each choice in isolation
    • Buy 1 Snickers a week or a 12-pack for 3 months?
      1. Choosing 3 snacks (1 per week) in advance, 64% chose a different snack for each week
      2. Choosing 1 snack each week, 9% chose different ones each week (Simonson 1990)
    • Low income people buy more lottery tickets one at a time than when deciding once how many to purchase (Haisley 2008)

STRAMGT279 – Global Strategic Management (Roberts)

  • Listing abroad (London, NYC) helps peripheral companies _look _more global, helping hiring and sales backdrop
    • Ex: an Argentinian / Italian steel pipe producer who has trouble attacking international talent
  • Traditional org models
    • Centralization for max quality/control
    • Multi-local federation of decoupled national companies
      • Pre-Union Europe: plant in every country to avoid trade barrier hassles
      • Philips didn’t enter the VHS/Beta fight with their own standard because their own US unit went with Matsushita
  • Since 90s: loosely coupled, “disaggregated” models
    • Non-incremental innovation has become more important than static position (efficiency & responsiveness) of the past
    • Empowering units + mandating commonalities / incentivising sharing
    • Loose or variegated coupling instead of tight/decoupled extremes
    • Learning through linkages
    • Expensive:
      • communication & management overhead
      • ambiguitiy & conflict

GSBGEN565 – Political Communications (David Demarest)

  • State of the Union speech

    • Law actually requires it to be delivered to Congress
    • Used to be in writing, oral presentation quite recent idea in 20th century
    • Safe and self-congratulatory: but when you take risk & danger out, gets boring
    • Often just skimming the surface of a long laundry list of topics (submitted by every agency and lobby group imaginable)
  • Massive speech needs to be a pyramid

    • every argument builds to a larger one, ultimately consolidating into the Big Idea
    • “when you wander too far from the core message, the speech loses momentum”
  • Consider jokes standing outside of your speech context

    • … because that’s how they’ll be spread on Youtube
  • Dan Quayle Bloopers

  • Debates (beyond Lincoln in 1860) were considered inappropriate in US tradition, squaring candidates directly against each-other – returned with the raise of new media (radio, TV)

  • Most watched:

    • Reagan vs Carter 80M
    • Palin vs Biden 69M
  • Ford in 1976 debate: “Soviets are not dominating Eastern Europe”

  • Carter announced a Vietnam draft dodgers amnesty in front of a military conference

    • obviously got boo-ed, many questioned why he chose not to use a supportive hippie gathering
    • the coverage later showed him as decisive, making an unpopular decision – a narrative he was lacking
  • Dukakis answer on the question suggesting his wife’s rape (in debate)

    • react emotionally to a question if needed, but answer it then
    • suppressing emotion looks inhuman, not professional
  • How to be gracious in victory in a way it doesn’t compromise your principles?

    • Ex: Bush refused to dance on the Berlin wall for the problems it would create for Gorbatchov for next needed steps
  • Building towards consensus between opponents AND with audience

    • “can we agree on the principle that…”
    • often no-one gives up on their edge with agreeing (early)
    • insting to hold on to your bargaining chips, even if fundamentally you don’t care that much
  • People care about issues, not process

    • if media talks about how well your campaign is run: you’re not talking about issues enough!
    • rare exception: Obama 2008
  • Close needs to be powerful, impactful, uplifting and dramatic: “the listener has to be able to relate their future to the one you’re painting”

ACCT219 – Financial Accounting (Guttman)

  • Business analysis & valuation
    1. Understanding the Past
      • info collection, understanding the business and accounts, financial ratios, cash flow analysis
    2. Forecasting the Future
      • income statement, balance sheet & cash flows
    3. Valuation
      • cost of capital, valuation models (residual income, cash flow-based), valuation ratios, complications
  • Always mind the sensitivity
    • How sensitive is #3 to assumptions made in #2?
    • Will something like 10% change in real net income blow the model up?
  • Financial ratios
    1. Profitability (ROA, ROE, ROFL)
    2. Asset turnover (TA, AR, Inventory turnover)
    3. Risk, Capital Structure and Liquidity (short term: current ratio, A/P turnover; long term: debt to assets)
  • Possible eliminations needed to achieve comparability of ratios
    • non-operating & non-recurring items?
    • after-tax interest expenses (to avoid financial structure distortions)?
    • accounting quality distortions (ex: renting VS capital leasing of facilities)?
  • Earnings Management to Avoid Earnings Decreases and Losses, Burgstahler & Dichev (1997)
    • showed there is a visible dent in earnings distribution
    • Earnings management - distribution dent near zero!
    • no companies want to show “just below zero” profits
    • matching effect in more than normal distribution showing “small profits” at least
  • Earnings management can be “real” (actual decisions on changing spending, incentivising sales in period) or purely “accounting”
    • Latter is often still GAAP-compatible, not just fraud: deciding time to recognise something, usage of reserves
  • Agency problem: you rarely get sued for “real decisions” to return to profitability – even if they actually are not in shareholder’s interest
  • You can make educated guesses of a firm’s industry by just looking at its common size reports (on percentage bases, not absolutes), ex:
    • service business: low inventory, turnover not meaningful
    • banks: deposits & loans render many other ratios/proportions minuscule (share volume of cash)
    • retail: high inventory, high turnover (and way higher for wholesale)
    • utility: low inventory, high dividends (= low retained earnings)
    • presence/high proportion of goodwill in M&A intense industries / fast growth

STRAMGT259 – Generative Leadership (Klein)

Networking Essentials

A class-designed co-curricular session to exchange tips’n’tricks for building and maintaining useful networks.

  • Too much focus on the most connected nodes in networks
    • Bandwidth issues
    • Often seemingly less-connected edges of a network are more interesting, because they could bridge entire very different / less connected networks
  • TIARA (from The 2-hour Job Search book (Google preview)) – a replicable routine to extract professional insights from someone in limited time, asking about:
    • Trends
    • Insights
    • Advice
    • Resources
    • Assignments
  • Disagreement/differing views in first meeting is a great hook for follow-up
    • Ex: e-mail a link to research a week later
    • Confirms you were listening
    • Builds further conversation
    • You can contribute facts (or at least other experts opinion) rather than emotion/getting personal

CS547: Human-Computer Interaction Seminar

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

Guest speaker: Jofish Kaye, Yahoo! (ex-Nokia): Comfortable, Communal and Creative Computing

  • MIT Media Lab’s future kitchen research project: Counter Intelligence
  • In 1988 Mark Weiser of Xerox PARC proposed ubiquitous computing at three scales: inch, foot & yard
    • Wait… phone, tablet, TV!
  • Learnings from studying tablet users
    • People often buy them “for the heck of it” – e.g there is no particular application in sight, more exploratory
    • Single-user centric security/privacy/personalization models can drive increasingly attached/personal use
      • Ex: won’t lend your tablet to a friend to check e-mail quickly
  • Book: Lucy Suchman, Human-Machine Reconfigurations: Plans and Situated Actions (Learning in Doing: Social, Cognitive and Computational Perspectives)
    • How interaction with computing reconfigures the human body & physical space. From tablets to Wii to interacting with smart furniture to…
  • “Kitchens have been historically very good at organising families”
  • The perception of tablets as devices for content consumption, rather than creation
    • Yes, BUT don’t miss the changing notion of creation here
    • People might type long texts less, but curate/mix/collage more – notion of creation is changing
    • Critics say this is inherently more shallow
    • Conservatively one could argue that rap is not music, because they scratch vinyl discs & don’t play guitars – but these definitions are purely cultural and change
    • Why to even have this conversation: worrying perspective of a device you can buy and only consume with – and need to spend more money to create anything
  • Call for experiment: have a small group commit to communicate to each-other only non-textually for a week (audio, video, calls & -mail)
  • Authenticating into tablet/tv screen with your phone?

CS207 – Software Economics (Wiederhold)

Guests: Ron Burback and Vishal Sikka (CTO of SAP).

  • On shifting the IP creation & supplier power around:
    • Google buys 400k, FB 200-250k servers/year…
    • …but from Intel, Foxconn, etc guys in the stack, not from Dell, HP or IBM

For more posts on the Stanford GSB Sloan life – click here to search by tag “sloan”.

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