Author: Jill Young Miller


About Jill Young Miller

As research translator for WashU Olin Business School, my job is to highlight professors’ research by “translating” their work into stories. Before coming to Olin, I was a communications specialist at WashU’s Brown School. My background is mostly in newspapers including as a journalist for Missouri Lawyers Media, the Atlanta Journal-Constitution, The Washington Post and the Sun-Sentinel in South Florida. Also, I am the reigning Olin Cornhole Champion.

As a leader, do you know if your employees trust you? Is your sense of their trust accurate? If you’re wrong, will that affect your success?

Most business leaders hope their employees trust them, and that hope is warranted based on research showing trust is critical for effective leadership.

But a critical unexplored question was whether leaders feel their employees trust them—and whether the trust they feel is accurate.

A new study by a team of researchers, including Olin’s Kurt Dirks and Andrew Knight, explored what underlies an accurate sense of trust. They conducted studies at two different types of organizations: one at a state corrections department, the other at a nonprofit caregiving organization.

Kurt Dirks
Kurt Dirks

“Our data suggest that leaders are at best moderately accurate,” Dirks said. “Also, importantly, our data suggest that leaders who are less accurate tend to experience more challenges, including more conflict.”

The paper “On the Relation between Felt Trust and Actual Trust: Examining Pathways to and Implications of Leader Trust Meta-Accuracy” is forthcoming in the Journal of Applied Psychology.

What causes leaders to be accurate? Popular wisdom suggested they would be correct—or not—based on reading employees’ verbal and nonverbal cues.

“The results of the two studies, however, indicated that the data did not support the popular wisdom,” said Dirks, Olin’s Bank of America Professor of Leadership.

Instead, consistent with a line of research from psychology, the authors found that leaders’ accuracy about employees’ trust is shaped internally and by a presumed “reciprocity” of trust.

They discovered that people followed a shortcut in terms of who they believed trusted them.

“The shortcut was, ‘Do I trust you?'” Dirks said. “In other words, individuals tend to assume if I trust you, you must trust me.”

The fact that this is somewhat true is what drove a leader’s actual accuracy.

Trust is critical

Trust in the workplace is associated with a range of important outcomes, including teamwork and leadership effectiveness, Knight said. It can motivate people to perform at high levels.

Andrew Knight

“Perceptions are important for governing our behavior and shaping how we interact with others,” said Knight, a professor of organizational behavior.

In their study, Dirks and Knight tested hypotheses based on two mechanisms that theory suggests shape leaders’ trust “meta-accuracy,” or the degree to which a person knows how others see him or her.

“Our research contributes to burgeoning interest in felt trust by elucidating the mechanisms underlying trust meta-accuracy and suggesting practical directions for leaders who seek to accurately understand how much their employees trust them,” the authors write.

Other authors of the paper are Rachel L. Campagna of the University of New Hampshire, Craig Crossley of the University of Central Florida, and Sandra L. Robinson of the University of British Columbia.

“One question that we don’t get into in this paper that’s a really interesting one is, ‘Why is it that some people are more accurate than others?'” Knight said.

Some economic observers continue to warn about signs of a potential U.S. recession. Glenn MacDonald, John M. Olin Distinguished Professor of Economics and Strategy at the Olin Business School at Washington University in St. Louis, says many signs aren’t particularly reliable — but do keep an eye on housing starts.

MacDonald sat down to discuss signs of a recession and whether he foresees one anytime soon. He doesn’t, but he cautions that history shows it’s not a question of if but when.

Where do recessions come from?

Much like earthquakes, we know a great deal about business cycles, but we don’t really know how to predict their arrival. Sometimes we can tell ourselves a story after the fact. But we don’t know whether those stories are correct.

People might blame the previous recession on the financial crisis?

The weakening housing market in 2006 precipitated the financial crisis; GDP growth was already shrinking when the housing market weakened. It’s not that the financial crisis caused the weakening housing market. It’s the other way around.


There are plenty of candidates for the cause of the most recent recession, including the high and rising level of government debt. But economics isn’t like physics, where there are certain rules that apply because, for example, the speed of light is a certain number. However, empirically, around the world, when government debt reaches something like a whole year’s GDP — that’s a noteworthy point. And the U.S. was getting there at that time, which many saw as a great cause for concern. The debt-GDP ratio has remained high, and, so far, the more frightening scenarios have not transpired.

One thing thought to predict recessions is an inverted yield curve, like occurred earlier this year, right?

Statistically there is a correlation between yield curve inversions and eventual onset of recessions. However, the connection between them is quite loose and difficult to employ to predict recessions confidently. For example, the yield curve was inverted for much of 2019 — suggesting a recession might be coming. But it is no longer inverted — suggesting the opposite.

When you see housing starts tailing off, that does tend to be a sign of trouble. And the reason for that is simply that the trouble has already started, as in 2006. So you are not really predicting a recession as much as noticing it early.

How are housing starts doing?

They were really, really strong in September. They’re not going as fast as they were going. But they’re still going.

We’re experiencing a long expansion. Should we be worried?

In a business cycle, proceeding from a trough to a peak is an “expansion.” On average in the postwar, US expansions been about five years long. So when people look at this 10-year expansion that we’ve just completed, they think it’s really long. But there is a lot of variability in expansion length. For example, the expansion that started right around 1990 also lasted 10 years.

Recognizing this variability in expansion length, the data suggest that the bulk of expansions would be less than 10 years in duration. So if you said, “It’s kind of like we’re almost overdue for a recession,” that would be consistent with the facts. But that idea is based on just 11 recessions and an economy that has changed drastically since the post war, so making confident predictions about such a rare event is impossible.

For Brent Sobol, the key to loving your work starts with understanding yourself and knowing what makes you happy. With that, he said recently, you’re in a position to make a positive difference in others’ lives.

Sobol found what he loved to do while he was a student at Washington University in St. Louis’ Olin Business School. In exchange for free rent, he managed his fraternity’s house and loved the work. Then, in the final days of Sobol’s last semester, a group of students asked a favorite professor for advice about starting their post-college lives.

“Follow your bliss,” the professor said.

“The message resonated with me to my core,” Sobol said in a recent talk at the Crowne Plaza Atlanta Midtown.

“That’s the only way you can really feel good about yourself,” he said. “When you feel really good about yourself, you’re in a position to help others and make a difference in their lives.”

Brent Sobol speaks about his mission to serve low- and moderate-income residents.

Sobol is president and founder of Legacy Community Housing Corp., a nonprofit he formed in 2009. The concept came out of lessons he learned over years of working in the affordable housing industry. During that time, he rehabilitated dangerous and blighted apartment communities, and he became a specialist in crime prevention and turning around multifamily communities.

“I got a reputation for being the guy who could turn around the apartments that were badly broken,” he said. “I was an owner and a property manager. Most apartments, there’s a great divide between the owner and the property manager.” That’s part of the problem with low-income housing, Sobol said.

Address root problems

Low-income housing could work well, he realized, if the goal was a safe community populated with good neighbors. And that goal can be achieved by providing social services that address root problems in the community and by having managers who are engaged in the community, said Sobol, who earned his bachelor’s in business administration from Olin in 1998.

Sobol moved to Atlanta in 2001, a few years after graduation, and became a millionaire by age 30. He also owns Sobol Realty Inc., a residential real estate company his father started in 1954. “My dad had a lot of good sayings,” Sobol said. Among them: “Giving is the path to happiness.”

Over time he has owned, managed, financed and invested in more than 6,500 rental and condominium units with values in excess of $128 million. He has overseen the successful repositioning of 14 apartment communities with capital improvement expenditures totaling over $27 million. During his talk, Sobol spoke about how his wealth and happiness grew alongside his mission to serve low- and moderate-income residents with respectable places to live.

Safety for his residents is paramount. “You need to feel safe in your home before you can do anything else. That’s fundamental,” he said. Landlords should always check tenants’ backgrounds, he said, but not enough do. In Atlanta, Sobol formed partnerships with the police, sheriff’s and fire departments.

Engage residents

Sobol also worked to engage residents. His properties have offered programs for all age groups, including bingo for seniors and daycare for children. “We hired really good teachers who had certifications, so the kids were learning when they came to our daycare.” His own daughter attended the daycare.

He also came up with other ways to add value to his residents’ lives. He created a community garden. He had an orchard of plum, pear and orange trees planted. Anyone can come and take the fruit.

And he was careful to put employees in jobs they love.

“Everybody benefited from that,” he said. “Customers loved us even more. We made more money. And, you know, the world is a better place when [people] love what they do.”

Learn how WashU Olin’s full-time MBA program — with global-mindedness, experiential learning and analytical rigor — equips future business leaders to confront challenge and change the world, for good.

If Philadelphia’s soda tax is any indication, local soda taxes don’t work as well as policymakers intend.

Olin’s Song Yao, associate professor of marketing, and two other researchers studied the effects of Philadelphia’s soda tax, which took effect in January 2017.

Several US cities have enacted soda taxes to raise revenue and fight obesity among their citizens. Berkeley, California, was the first, but Philly was the first big city to adopt one. It uses the revenue to fund schools and improve parks, recreation centers and libraries.

The city’s 1.5-cents-an-ounce tax led to a 34% price increase for soda. And soda sales in Philadelphia dropped sharply—by 46%, according to the working paper “The Impact of Soda Taxes: Pass-through, Tax Avoidance, and Nutritional Effects.”

Song Yao

But here’s the catch: Soda sales at stores just outside the city increased dramatically. Apparently, a lot of people leave Philly to buy their soda elsewhere.

“The cross-shopping outside the city offset more than half of the reduction” of soda sales in the city, Yao said. So the net reduction in sugary drinks consumption is only 22%, he pointed out.

The reduction in calories and sugar people consumed because of the tax is even smaller; 16% and 15%, respectively. “The health impact is mediocre at best,” Yao said.  

The tax also imposes a disproportionate burden on low-income people, he said. “Access to transportation is more difficult for low-income households, so they engage in less cross-shopping and end up paying more inside the city.”

So far, NPRMarketWatchNational Review and The Washington Post have reported on the findings.

Policy lessons

The findings in Philadelphia provide policy lessons on how to design soda taxes or other types of “sin” taxes, according to the paper by Yao, Stephan Seiler of the University of California in Los Angeles, and Anna Tuchman of Northwestern University.

“If taxes are localized (as is the case for all current soda taxes), high tax rates will be sub-optimal for generating revenue because they lead to cross-shopping, which reduces the tax base,” they write.

“A larger geographic coverage will make cross-shopping more difficult and therefore generate greater tax revenue.”

Dean Mark Taylor is definitely doing his part to contribute to Olin’s strategic priority to build a stronger and broader reputation for research with impact.

According to the latest from Research Papers in Economics (RePEc), Taylor is the third most influential researcher in international finance in the world. In addition, the dean is in the top 10 of international finance researchers globally in terms of research citations, according to Google Scholar.

RePEc is a collaborative effort of hundreds of volunteers in 101 countries to enhance the dissemination of research in economics and related sciences. 

Taylor has long been one of the most highly cited financial economists. His research on exchange rates and international financial markets has been published extensively in many of the world’s leading academic and practitioner journals. He is also the author or co-author of a number of books, including two of the leading European textbooks in economics and macroeconomics.