Conspiracy theories about COVID-19 pose a public health risk. They trigger suspicion about scientific recommendations, hurt response efforts to the pandemic and even have led to the burning of 5G cellphone towers.
“Because of their powerful influence in shaping both our narratives about and responses to the pandemic, these conspiracy beliefs receive a great deal of public attention,” said Olin’s Benjamin Dow, a postdoctoral research scholar in organizational behavior.
In a recent study, a review of literature about COVID and the internet, Dow and his coauthors found that the pandemic intensified the spread of conspiracy theories. As COVID disrupted social structures, people turned to the online world, and that led to “increasing contagion,” he said.
They specifically studied social media during the pandemic. “I thought, surely there’s something interesting going on here that could be better understood,” Dow said.
Their study revealed this: “Social media radicalizes beliefs.” Then, “as conspiracy theories are reinforced in online communities, social norms develop, translating conspiracy beliefs into real-world action,” he said. Such actions might include rejecting wearing face masks or flouting rules about social distancing.
“The attention can drive perceptions that conspiracy beliefs are less fringe and more popular, potentially normalizing such beliefs for the mainstream.”
‘Sudden lack of control and increased uncertainty’
In general, the pandemic increased social media usage. General internet activity rose 25% in the days after lockdown, the authors note.
Specifically, in 2020, global social media use accelerated by 13%, with 330 million new users, resulting in a total of 4.7 billion total users in April 2021.
“We argue that part of the reason people consumed more social media was because of pandemic-related disruptions to their cognitive and social structures. Although this may not have been the only reason for the increase, it is a significant contributing factor.”
In the context of the pandemic, “the sudden lack of control and increased uncertainty may have made people particularly vulnerable to conspiracy theories as a form of alternative structure,” Dow said.
Because social media played a central role in the spread and endurance of COVID-19 conspiracy theories, the question is how to interrupt the cycle. The authors assert “there are several proven options” for reducing the negative influence of online conspiracy theories:
Content restriction (preventing exposure to and breaking up echo chambers);
pre-bunking (attempting to inoculate people before they are exposed);
critical consumption (encouraging cognitive engagement during exposure);
and, if all else fails, debunking (trying to alter conspiracy beliefs already held and address the problematic downstream attitudes and behavior directly).
Another option is to encourage breaking down group demarcations and to encourage social connections that were lost or weakened in the pandemic.
“One of the things that was surprising to me that I took away was how much the social side matters,” Dow said.
“So how do we reconnect people with friends and family and more diverse groups of people with different kinds of opinions so that their self-worth and identity isn’t tied up in being a permanent believer in a conspiracy theory?”
Small private firms that provide health insurance for their employees have better worker productivity and retention—as well as overall profitability—when compared with small firms that don’t offer health insurance, according to research by Ulya Tsolmon, assistant professor of strategy for Olin Business School.
The results suggest that investments in employee health and well-being provide a competitive edge to firms, especially when labor market competition for workers is high.
“The results tell me that firms are gaining financial advantage even with their expenses toward health insurance benefits,” Tsolmon said. “The productivity results suggest that workers are ‘giving back’ to the firms by being more productive, which translates into higher profits.”
“Healthy and happy employees are innovative and productive employees.”
Ulya Tsolmon, assistant professor of strategy
The research also explored the link between high unemployment insurance benefits at the state level and more small firms providing health insurance in that state. High unemployment benefits ease employee mobility between companies, and firms respond by increasing “internal market frictions,” like offering health insurance, to keep their employees, the researchers found. That correlation didn’t apply to bonuses, pensions or training—making health insurance a unique lever among employee benefits.
The paper is the first to explain health insurance provision in small firms from the perspective of human capital management and to use empirical evidence to test its impact on firm performance, the authors say.
Data from 15,000 small firms
“Health insurance is a significant investment for small firms, so the interesting question to me was not why firms don’t offer health insurance, but rather looking at firms that do offer health insurance, asking why they do that and whether it’s a smart strategy and under what conditions,” Tsolmon said.
The research used data from the financial records of 15,000 small firms (with no more than 500 employees) in the US. The data set included accounting details on all expenses and revenues, as well as employee records, for five years. The authors looked at twelve different variables, including training costs for an employee.
Tsolmon supplemented the financial records with 761 Glassdoor reviews and 11 open-ended interviews with randomly selected small business owners, representing different industries and firm sizes. Just like with the numbers’ data, employee satisfaction was reported to be higher in firms that offered health insurance, and business owners spoke about more easily attracting and retaining employees after they began offering health insurance.
Implications for large firms
“By investing in worker well-being,” Tsolmon said, “firms can tap into their latent productivity and innovation that’s difficult to incentivize with monetary rewards alone. Healthy and happy employees are innovative and productive employees.”
The research also has implications for large firms, most of which provide health insurance but whose benefits differ in generosity.
“Given our finding that policies intended to increase employee wellness can affect turnover, productivity, and firm performance, large firms should consider increasing the employee uptake rate of health benefits by bearing a greater share of the insurance costs themselves,” the authors write.
At Olin Business School, “values based, data driven,” is a pillar that informs our decisions and strategic plans. Recently, John Barrios, assistant professor of accounting, brought that principle to Washington, DC, where his research helped inform and ultimately shape a feature of the Build Back Better legislation.
Attracting and supporting entrepreneurship and investment in communities is a crucial driver of economic growth and is one goal on which Republicans and Democrats can agree. Startups require significant capital, though. That’s where venture capital funds come into the picture.
Venture capital firms raise funding for startups or emerging companies that have been deemed to have high growth potential in exchange for equity or ownership in the company.
“Unlike the large hedge funds and private equity funds, venture capital funds are typically smaller in size and scale,” Barrios explained. “Fund managers usually sit on the company’s board and may be involved in day-to-day operations like a consultant.”
Aside from management fees—which are minimal and primarily cover operational costs—venture capital managers mainly make money when the investments are profitable. Their cut of the profit is known as carried interest. Carried interest is currently taxed as a capital gain rather than general earned income. This method of taxing makes venture capital more worthwhile for managers.
To outsiders, though, taxing carried interest at capital gains rates looks like a loophole for the rich to minimize their tax burden, Barrios said. So it wasn’t surprising that the initial version of the Build Back Better legislation included a provision to tax carried interest as general earned income.
Barrios and Yael Hochberg, at Rice University, wanted to study the potential impact of these tax changes on the economic attractiveness of new venture capital fund formation. In other words, would increased taxes on carried interest turn away would-be fund managers? And, if so, what impact would this have across the country?
“Such tax changes have the potential to have far-reaching effects on the creation and growth of innovation-driven entrepreneurial ventures in precisely the locations where policymakers are often seeking to increase entrepreneurial activity and growth,” the authors wrote.
Findings inform policymakers
The researchers used data from the Private Capital Research Institute/Burgiss and PitchBook, which provided information about funds by state and size. From that data, Barrios and Hochberg generated sample income streams for a venture capital fund manager for funds of varying sizes over the life of a single fund under the current tax taxation regime as well as under the proposed tax regime that taxes carried interest at ordinary income rates.
They then compared those potential incomes for fund managers to the average wage earnings for a person with similar education and experience, by state, adjusting for cost of living and other factors.
Their analysis found that changing the taxation regime for carried interest from long-term capital gains rates to ordinary income rates would significantly reduce the attractiveness of forming a new fund for the vast majority of funds in US states other than California, Massachusetts and New York.
“Given the importance of VC [venture capital] funding for US innovation, our findings may serve to inform and aid policymakers in their current deliberations as they consider, design, and implement potential new tax laws that will affect the VC industry,” they wrote.
As previously noted, the findings did inform and aid policymakers. The proposal of taxing carried interest as earned income was struck from the Build Back Better legislation, which is currently stalled but not dead.
Innovation in mid-America
Barrios said this is good news for cities across the country—like St. Louis—that have made generating new businesses a top priority.
“If we really want to foster entrepreneurial hubs and stimulate investments in middle America, it’s going to take more than tax credits. You need capital, and that comes from VCs,” Barrios said.
“People have this vision of venture capital managers being really wealthy. In reality, starting a VC fund in mid-America is risky and not as profitable as you might think,” Barrios said. “More than 50% of them do not make a positive return. Even successful partners could reasonably make a comparable income working a nine-to-five job at a consulting firm.
“Changing the taxation would make it even less lucrative and would make it more difficult to get people to raise the capital needed to support the innovation happening in our communities.”
At a time when evictions and mortgage defaults have been likened to an oncoming tsunami across America, a big-data study of loan-to-value ratios in the wake of the 2007-08 recession carries a cautionary forecast for vexing economic weather ahead:
The higher a worker’s outstanding mortgage relative to their home value, the worse their future income growth and job mobility.
Those were the key findings when four researchers, including two from Washington University in St. Louis’ Olin Business School, delved into the wage data and credit profiles encompassing 30 million Americans across 5,000 companies. They found a negative relationship between workers’ income and their home loan-to-value (LTV) ratio, especially when the home was underwater (higher principal owed than value).
For example, the scientists discovered that people with underwater mortgages earned $352 — or 5% — less monthly than workers with less mortgage debt relative to home values.
Compounded by credit and liquidity issues, these workers are virtually stuck, unable to move to a job with a better income or a new area, the researchers wrote in their study forthcoming in The Review of Financial Studies.
And it could well translate to the COVID-19 economic effects today.
“The impact of the current crisis on local economies varies widely across the U.S.,” said Radhakrishnan Gopalan, professor of finance at Olin and study co-author. “Our study highlights the difficulties someone in a worse-affected area may face in trying to pack up and move to a less-affected region. Furthermore, our study also highlights an important cost of homeownership: For instance, buying a home will constrain your labor mobility, and in the long run that may adversely affect your labor income.”
“This is one of the first studies to tie detailed credit histories to information on worker mobility and pay increases,” added co-author Barton Hamilton, the Robert Brookings Smith Distinguished Professor of Economics, Management & Entrepreneurship and director of the Koch Center for Family Business at Washington University. “Prior work has analyzed these factors in isolation and has not made the connection between the two.”
Seeking ways to scrutinize the effect of home equity and labor income, in addition to the mechanisms intertwined, the researchers used Equifax information and Corelogic house-price indices to drill down to study a random sample of 300,000 workers with an active mortgage over a 72-month period earlier in this decade.
They measured home equity as LTV — the unpaid mortgage vs. the market value — on the workers’ primary residence. They additionally accounted for home-value increases/decreases using ZIP-code level price fluctuations and controlled for local economic conditions. Moreover, they contrasted the income path of homeowners versus renters who worked at the same firm, were of a similar age and job tenure, and held a similar level of income and non-mortgage debt.
What the data essentially showed: Homeowners facing high LTVs were less likely to change homes, but more likely to change jobs, if they could. And renters working at the same companies and with similar job tenure faced no such issues. Additionally, homeowners with high LTVs faced slower income growth while renters faced no such penalties.
It wasn’t as cut and dried as a rent-vs.-own debate, though. Income and mobility for homeowners could vary. A worker could face relatively smaller income declines or find greater employment opportunities if they lived in a metropolitan area with more jobs — for instance, an IT worker in San Francisco/Silicon Valley — or a state with softer non-compete laws limiting movement within an industry.
Housing prices and wages
Still, they found that declines in housing prices as a result of that 2007-08 recession suggested a 2.3% reduction in monthly wages economy-wide due to constrained mobility.
“If the adverse effects of the current pandemic on local economic conditions also spill over to house prices, then we will find ourselves with a number of underwater homeowners,” Gopalan said. “In that scenario, the effects we document will be very relevant.”
Gopalan and Hamilton were joined in the research by two former Olin PhDs, Ankit Kalda and David Sovich, who work at Indiana University and the University of Kentucky, respectively.
They wrote that a homeowner with an underwater mortgage were to face a new job offer in a different area, they were confronted with three (unappealing) prospects:
Sell and swallow the shortfall — meaning they still must require some access to liquidity, despite being credit constrained.
Retain the home and rent it out — meaning there will be no or negligible down payment on a new home in the new area.
Walk away and default on the mortgage — meaning deeper credit issues.
In short, their mobility was as hampered as their current job situation, the co-authors said. A worker may not seek out better opportunities in the first place and, consequently, feel adverse effects on income because of an undermined bargaining power at the current workplace.
For the record, the median individual in their study group was 41 years old with an annual $41,015 salary; comparatively, the median person in the U.S. workforce overall in that time window was 41.9 with an annual $41,392 income, the co-authors wrote. The median loan: $192,400.
“Our study highlights an important cost of home ownership,” Gopalan said. “While the ‘American dream’ is usually defined in terms of building wealth through home ownership, the financial crisis has revealed a few glaring holes in this story. Our study formally quantifies one important cost of following the ‘American Dream.’ A relatively safe way to own a house is to make sure one has sufficient down payment or home equity so that even if house prices fall, one is not stuck with an underwater mortgage. To this extent, our study recommends caution in pushing mortgages with less down payment.”
Hamilton added: “Our study highlights that policies affecting financial markets can directly impact the labor market as well. Businesses also need to be aware of the indirect costs that credit markets and home ownership may impose on mobility and the optimal allocation of their workforces.”
For Dave Peacock, being values-based and data-driven is key to the success of Schnucks Markets in achieving its higher purpose of “nourishing people’s lives.” Peacock, EMBA ’00, is president and COO of Schnucks, a St. Louis-based regional grocery chain with 15,000 employees. Communicating Schnucks’ purpose is vital to the company’s culture, he said. It’s also important in attracting new employees to the company, which hires as many as 5,000 new workers each year.
“We have regular sessions to talk about the importance of our Midwest family values and how that fits with our purpose of nourishing people’s lives,” he said. At Schnucks, those values speak to a customer-first mentality, the willingness to try new things, a culture of tolerance and hard work and haste to help those in need.
Peacock also formed a data-focused unit at the company in January, hiring Tom Henry, a member of the board of WashU Olin’s Center for Analytics and Business Insights, to serve as chief data and analytics officer. Henry now leads a 50-person business unit with the mission of “constructing and maintaining a purpose-built information management environment, governed and utilized by teammates at all levels of the enterprise, where trusted and increasingly intelligent insights are produced.”
Meeting consumer demand
Schnucks’ efforts align with growing consumer sentiment. Nearly 80% of Americans say they’re more loyal to purpose-driven brands, according to a 2018 study by public relations agency Cone/Porter Novelli. The same study said more than three-quarters aren’t satisfied with brands that only make money; they expect companies to positively affect society.
That shift is in step with WashU Olin’s brand positioning—to “champion better decision-making by preparing and coaching a new academy of leaders who will change the world, for good.”
The movement dovetails with the work of Olin professors Stuart Bunderson and Anjan Thakor, who are at the forefront of this advancement in business strategy that could help workers achieve professional success and fulfill values-based ambitions in their professional lives.
Bunderson, director of Olin’s Bauer Leadership Center and the George and Carol Bauer Professor of Organizational Ethics and Governance, has published a book about it, The Zookeeper’s Secret; Thakor, along with Robert E. Quinn from the University of Michigan, published a new book in August called The Economics of Higher Purpose and a cover story (“Turning Purpose into Performance”) in the July–August 2018 issue of Harvard Business Review.
Benefits: Dollar signs and beyond
A common theme of Thakor’s and Bunderson’s scholarship indicates that young professionals, and many others, want to work for companies that articulate a greater purpose—improving the world where they can, whether that’s in their local communities or addressing societal issues worldwide.
In addition, their work shows more than anecdotal evidence that purpose-driven organizations generate more worker and customer loyalty. Increasingly, workers are holding their employers more accountable and demanding to see more examples of executing on purpose, according to Thakor.
Those companies with the most clarity in the pursuit of their purpose frequently perform better financially, according to a 2016 study led by The Wharton School.
Thakor and Bunderson, however, also warn of pitfalls in creating a purpose-driven organization. Leaders of purpose-driven companies can’t take on every charity case and could face backlash from employees when workers’ pet projects aren’t a priority. Further, having a purpose doesn’t guarantee financial success, especially for startups.
“Creating a higher purpose is not a tool or tactic to make more money or achieve better financial performance,” said Thakor, the John E. Simon Professor of Finance and the director of doctoral programs at Olin. “Turning purpose into performance is very hard. Emotionally, it takes a lot of effort.”
He stresses that firms must meet two conditions: First, the identified purpose must be authentic, and second, it must be communicated with clarity. Thakor says being authentic is hardest, in part because it goes beyond putting posters on walls and communicating from HR to employees.
Can purpose have a downside?
“Every company now has a statement of principles that is displayed, and most of the time people in an organization understand it has virtually no meaning for the decisions the company makes,” Thakor said. “So, it doesn’t really affect the employees.”
For a purpose-driven company, that’s not the case. Managers and employees are vested in the core values and make decisions based on what they believe supports those core values. As a result, being purpose-driven will have costs and impose constraints.
“That’s especially significant when a company’s competitors are without purpose and have no restrictions,” Bunderson said. “Those competitors are not restrained in the business deals they will pursue. Purpose has to be backed by actions, mission and commitment. The purpose-driven company will say, ‘We won’t do that.’”
While there are hazards in the purpose-driven organization, Bunderson and Thakor agree that the benefits of being purpose-driven outweigh the risks.
There are a couple of ways purpose can help,” Bunderson said. “It’s not just feel-good, and it can be a competitive advantage.”
For example, millennials seek purpose as much as profit in their work, so communicating about a purpose-driven organization can be an advantage when recruiting 20-somethings or MBA students—or when fielding inquiries from recruiters.
For example, millennials seek purpose as much as profit in their work, so communicating about a purpose-driven organization can be an advantage when recruiting 20-somethings or MBA students—or when fielding inquiries from recruiters.
Sue McCollum, JD ’15, said having a values-based purpose, especially during challenging times, engages employees and keeps them moving in a positive direction. McCollum is chairman and CEO of wine and spirits distributor Major Brands Inc.
One of the ways Major Brands does that is through its Safe Home program, offering thousands of free rides home a year to bar patrons in a partnership with ride-hailing service Lyft. “It’s part of our push for social responsibility and accountability that has become really important to our people here, to our suppliers and to our customers,” McCollum said.
The challenge: Establishing purpose
Workers, customers and investors want to be part of something greater than themselves, research has shown. Having a greater purpose, however, has to be more than a mission statement and jargon about respect, teamwork and shared vision, Thakor said. It’s about creating leaders who are prepared to make, and stick with, difficult values-based, data-driven decisions.
The biggest challenge is for leaders to establish a company’s higher purpose, Thakor said.
“Giving to charity is not higher purpose; every company does that,” he said. “It’s not having a mission statement; most companies have those. It’s about going through a group of exercises to discover an authentic purpose that will guide all future business decisions.”
In his book, Thakor cites Apple and Walt Disney Co. as examples of companies that successfully established their higher purpose. Disney’s purpose in Disneyland was to create “a place for people to find happiness and knowledge.” For Apple, he offers a Steve Jobs quote: “Great companies must have a noble cause. Then it’s the leader’s job to transform that noble cause into such an inspiring vision that it will attract the most talented people in the world to want to join it.”
Once the purpose has been discovered and established, it should carry over into all aspects of the company, from how meetings are run to the people who are hired.
The concept of business leaders making decisions based on values —as well as data—is growing, but isn’t novel. Olin’s strategic pillar focused on creating leaders who make values-based and data- driven decisions has its roots in the business school’s founding.
“We’re talking about issues at the core of what we stand for,” Bunderson said. “In 1915, when William Gephart was making the case for why the university needed a business school, he cited the need to understand complex information (that’s the data part) as well as the need to consider how our decisions affect the broader society (that’s the values part). Being values-based and data-driven is in our DNA.”
Eight Steps to Organizational Change
Anjan Thakor outlines the steps in his book, The Economics of Higher Purpose: Eight Counterintuitive Steps for Creating a Purpose-Driven Organization, co-authored with Robert Quinn, professor emeritus at the University of Michigan’s Ross School of Business and a cofounder of the school’s Center for Positive Organizations.
Envision a purpose-driven organization
Discover the purpose
Meet the need for authenticity
Turn the higher purpose into a constant arbiter
Turn midlevel managers into purpose-driven leaders
Connect the people to the purpose
Unleash the positive energizers
More support for purpose
On August 19, 2019,
the powerful Business Roundtable lobby—which includes the CEOs of dozens of
major US companies—issued a revised “Statement on the Purpose of a
Corporation.” The one-page declaration, with 181 signatures, includes a
corporate imperative to support and invest in communities and people: “Each of
our stakeholders is essential. We commit to deliver value to all of them, for
the future success of our companies, our communities and our country.”