Tag: Faculty

The $2 trillion plan to prop up the US economy is expected to pass the House of Representatives on March 27. It’s intended to respond to the coronavirus pandemic and provide direct payments and jobless benefits for individuals, money for states and a huge bailout fund for businesses. Olin experts weigh in on whether it is sufficient as the economy reels.

Other economic steps ‘would be better’

“While much of the country—including President Trump—is looking forward to when this coronavirus crisis will end, I think it is important for everyone to realize that the coronavirus crisis has not really begun yet in the United States.

Raphael Thomadsen

“The $2T package is likely to be a first step, especially since the federal government does not seem willing to implement the type of nationwide shelter in place order that would be needed for us to quickly contain the outbreak. The longer this goes on, the harder it will be for companies to keep employing its workforce, and the more lost economic value there will be.

Are we able to keep spending this type of money every two to three months? I am unsure about that.

Raphael Thomadsen

“I also hope that it is well run. If the money does not get spent right, we may end up losing the jobs we are trying to save.

“I would propose some other economic steps that I think would be better. I would suspend rent, mortgage and loan payments through the national emergency. (By suspending them, I wouldn’t change the amount of money paid back, but effectively the national emergency would become a time when loans and housing assets would temporarily earn a zero rate of return.) This has been done in parts of Europe, so it is a doable thing to do.

“I do think actions giving households in need cash is valuable, although people probably need less cash if they do not have to pay their rent or loans, allowing us to stretch out the federal spending to get more bang for their buck. We would also have to help make sure that businesses do not go out of business, but by taking away rent and borrowing costs, that should help a lot of businesses get through their time being shuttered.”

Raphael Thomadsen, associate professor of marketing

‘Ridiculous for this to be a stimulus bill’

“China’s economy is slated to slow from 6.1% growth to 2.4% growth, rather than contract, so the estimate of a 24% contraction in the economy seems extreme—unless we don’t take containment seriously.  If we can contain it, $2 trillion seems excessive—it’s 10% of GDP, and greater than revenue from income tax last year. Having said that, if we are asking businesses to close, then we need to compensate them and their employees for the closure.

Anne Marie Knott

“But we should behave like venture capitalists and authorize money weekly or bi-weekly, rather than committing to a package for a program whose duration and severity is completely unknown — but forecastable if we behave like China and South Korea.

“It is ridiculous for this to be a stimulus bill.

“You can’t stimulate an economy when there is no way for people to spend money.

Anne Marie Knott

“As Phil Dybvig [Boatmen’s Bancshares Professor of Banking and Finance] says, this is a recipe for inflation. Accordingly, we shouldn’t be writing checks to everyone, we should only be writing checks to people who are furloughed due to business closures.”

Anne Marie Knott, Robert and Barbara Frick Professor of Business, Olin Business School

Will people spend or save?

Cynthia Cryder

“Consumers with stable jobs will likely treat the direct payments from this bill somewhat similarly to how they treat tax refunds. Consumers frequently spend a chunk of tax refunds, but notably, they actually save a higher percentage of their tax refunds than they do of their standard income. In this time of uncertainty, these consumers are likely to save an even greater chunk of the direct payments from this bill than they do of typical tax refunds.

“But of course, consumers without stable employment will use these direct payments as a financial lifeline. They will likely need to spend the funds to cover the costs of necessities.”

Cynthia Cryder

Cynthia Cryder, associate professor of marketing

‘Attack the problem’

Glenn MacDonald

There is no net stimulus, although there is a transfer of resources from taxpayers to those who receive the checks. The same applies to business bailouts, low-interest loans, etc. It’s a fact the we have a problem at the moment, and many of us are going to feel the effects of that, whether it be directly through being ill, or less directly by having to work less or differently. Checks from the government will help some of those who feel those effects, but at the expense of others. There is no overall economic benefit, although there might be political advantages.

“The only way for the government to stimulate the economy is by doing something that creates new economic value, or reduces wasted value, not just rearranging the value we already have.

Glenn MacDonald

“This is why the government’s attention should be solely directed towards funding serious attempts to develop vaccines, streamlining approval processes, developing ways to protect health care workers, expanding short term hospital capacity, … That is, attack the problem instead of engaging in pointless and ineffective attempts to ‘do something.'”

Glenn MacDonald, John M. Olin Distinguished Professor of Economics and Strategy

As long as the health crisis is ongoing

Radhakrishnan Gopalan

“I don’t think any amount of stimulus payment will make households spend more as long as the health crisis is ongoing. The same goes for business investment.

“On the other hand, the stimulus payments to households will enable them to not fall behind on payment of fixed obligations and hence aid in quick recovery once the health crisis passes. The extension of unemployment benefits will achieve the same objective. 

“As far as the payment to business goes, while the stimulus is unlikely to encourage business investment, it will avoid business failure and bankruptcy.

Radhakrishnan Gopalan

“As far as layoffs go, I am not sure if the stimulus has some  special provision encouraging firms to avoid or minimize layoffs. Based on the experience in Germany during the great recession, the most effective provision is for the government to subsidize some part of employee wages. Stipulating conditions to business aid such as no layoffs may not work as that will only make firms reluctant to avail of government aid.”

Radhakrishnan Gopalan, professor of finance and academic director of the IIT-Bombay-Washington University Executive MBA Program

Pandemic Unemployment Insurance

Seth Carnahan
Seth Carnahan

“The most interesting part of this bill for me is that it offers 26 weeks of unemployment payments to self-employed workers and contract workers (e.g., Uber drivers), through a new program called Pandemic Unemployment Insurance.

“Previously, unemployment payments were only available to workers who received wages that are reported on a W-2. It is not entirely clear yet how the government will determine which self-employed workers and contract workers are eligible for these payments.

“I am very interested to see if unemployment assistance for self-employed workers and contract workers becomes a permanent feature of our social safety net.

Seth Carnahan

“There has been a growing discussion about how the emerging class of gig economy workers, like Uber drivers, should be viewed from a legal perspective. Are they employees? Contractors?

“Uber has previously fought hard to keep their drivers classified as contractors, as this allows Uber to avoid paying certain benefits. But Uber lobbied hard for this new Pandemic Unemployment Assistance program for their drivers.

“Now that the government is using public funds to support Uber drivers (and hence making it more attractive to be an Uber driver now and in the future), it seems reasonable to predict that the government might ask Uber to, in turn, do more for its drivers. Especially if unemployment insurance for gig workers becomes a permanent feature of our social safety net.”

Seth Carnahan, associate professor of strategy

Big business relief ‘does not go far enough’

“The $75 billion industry-specific loans included in the stimulus package is welcome news for the intended industries: hotels, restaurants and airlines, as is the $17 billion for Boeing and defense-related companies. The loans will allow companies in those industries to meet their short-term obligations and cash flow needs, and prevent them from aggressively cutting capacity and laying off employees.

“Not only will it help the industries through the next few months of nearly stopped economy, it might also help ramp up resources in the early part of the recovery when the virus spread slows and people return to work. Companies in these industries will need working capital to bring up their capacity to support normal demand.

Panos Kouvelis

“However, I worry that the package does not go far enough to drive a fast recovery. While the stimulus package seems to reflect, always on the lower side, estimated impact in any one of the intended-to-protect sectors, it fails to understand the disaster propagation across sectors and the corporate-inertia behavior in slowing down or ramping up in the face of unprecedented uncertainty. When demand for airline services suddenly dropped 60% to 80%, the airlines were not able to immediately adjust capacity (i.e., number of flights). They are still carrying more aircraft contracts, employees and other supporting contract services than what will be needed to meet the projected demand for the next six to nine months, or even a year.

“Inertia in decisions is common in situations that are hard to forecast and requires high working capital needs not supported by revenue streams. This is where the stimulus plan loans will be most helpful.

Panos Kouvelis

“As airlines exhibit inertia in adjusting down capacity, they will exhibit similar inertia in slowly adjusting their capacity up. Their future planning will always be more pessimistic in their plans for planes and other supporting supply chain services.

“This will affect all suppliers to the airline industry but in particular our major plane manufacturer, Boeing. It will be affected not only in terms of delayed or canceled plane purchases this year, but less aggressive plane purchases in the next four to five years. Future corporate resilience on the part of the airlines will require not forgetting the ‘black swan’ event you experienced vividly.

“Finally, Boeing’s market value has already been hit hard by the pandemic crisis. On the commercial plane side, 737 MAX orders are already in question, and there will be canceled orders and fewer future orders by a hammered airline industry.

“The defense side will inevitably be hit, too, as the government puts its emergency resources into public health, health care management, fighting market stagnation and unemployment, and might be less inclined to accelerate defense programs or purchases of the current weapon systems.

“In a serious interconnected supplier system in the aerospace and defense industries, the pandemic disaster has just started and its magnitude might not be fully accounted in this cash flow maintenance and short-term continuity risk management package.”

Panos Kouvelis, director of the Boeing Center for Supply Chain Innovation, Olin Business School

WashU Senior News Director Sara Savat contributed to this report.

During unprecedented times, the WashU Olin community is coming together as the community we truly are. Though students, faculty and staff span across the city, the country and even the world, setting up virtual study spaces everywhere from New York to India, we’re working to maintain that sense of community, collaboration and friendship that defines the WashU Olin experience.

As virtual classes started this Monday, March 23, students and faculty took the time to document their classroom “views” for the Olin blog.

Doug Villhard, professor of entrepreneurship, asked students to share what their “study spaces” look like.

Top row, left to right: Kaila Pederson (MBA ’21) confronts the challenge of a small space and embraces innovation to create a desk; Marguerite Whitelaw (MBA ’21).

Bottom row, left to right: Lexi Lessaris (MBA ’21) and her co-worker Lola; Ellen Kenzora (MBA ’21).

Students and faculty also shared moments from their virtual classroom spaces and team meetings on Zoom.

Left column, top to bottom: Tom Fields’ Strategic Cost Analysis class, submitted by Nitish Yadav (MBA ’21); EMBA 54’s first virtual class, Innovation and Entrepreneurship, taught by Nick Argyres; Barton Hamilton’s Compensation, Incentives and Organizing, submitted by Nidhi Kandari (MBA ’21).

Right column: Peter Boumgarden, professor of practice, strategy and organizations, teaches a group of undergraduates.

Teams and student groups won’t let distance stop them from getting great things done.

CEL practicum team works on a project for Midwest Bank Center.

From left to right, top to bottom: Hannah Levin, Lael Bialek, Bruno Moreira Yamamura, Lin Xie, Frankie Hong, Chris Colon (not pictured).

The Graduate Business Student Association’s incoming leadership team holds their first meeting.

Top row: Ellen Kenzora, Kendra Kelly, Shivani Jain

Middle row: Raphael Kodjoe, Nidhi Kandari, Dolapo Ojutiku

Bottom row: Gina Wang

Not pictured:  Gaurav Gupta

And staff and faculty have shared their new personal workspaces.

From left to right
Row 1: Brooke Van Groningen (Assistant Brand Manager, Marketing & Communications), Ashley Macrander (Assistant Dean & Director of Student Affairs),

Row 2: Todd Milbourn (Vice Dean of Faculty & Research); Glenn MacDonald (Professor of Economics & Strategy), Allison Dietz (WCC Employer Relations Lead),

Row 3: Dorothy Kittner (WCC Associate Director & Dean of Business Relations) Paige LaRose (Director of Undergraduate Programs), Amy VanEssendelft (CEL Senior Program Manager),

Row 4: Heather Cameron (Professor of Practice, in Berlin), Molly Cruitt (Social Media Strategist, Marketing & Communications), Jodi Heen (Faculty Support).

Though we are far apart now, WashU Olin remains together as a community. We can’t wait for our students, faculty and staff to be on one campus once again. Until then, a virtual cheers and best wishes for a great semester.

Dennis Zhang has won the 2020 Olin Award for research that creates a human-focused algorithm to improve warehouse workers’ packing time while also reducing material costs.

The Olin Award, which includes business school recognition and a $10,000 prize, is intended to promote scholarly research that has timely, practical applications for complex management problems.

Zhang, assistant professor of operations and manufacturing management, received notice that he had won this year’s award during a short meeting in Dean Mark Taylor’s office on Wednesday afternoon.

His winning research focused on bin packing at the Chinese online retail giant Alibaba to test a human-centric algorithm that, as it turns out, could save Alibaba more than $3 million a year. The paper, “Predicting Human Discretion to Adjust Algorithmic Prescription: A Large-Scale Field Experiment in Warehouse Operations,” is under revision in Management Science.

“Well, that’s a nice surprise,” said Zhang, laughing.

“This was a stunning piece of research,” Taylor told him. “A lot of the judges put ‘number one’ immediately.”

Richard J. Mahoney, former CEO of Monsanto and a Distinguished Executive-in-Residence at Olin, initiated the award, now in its 13th year.

This is Zhang’s second Olin Award. Last year, he and Jake Feldman, assistant professor of operations and manufacturing management, received the award for “Taking Assortment Optimization from Theory to Practice: Evidence from Large Field Experiments on  Alibaba.” They used data from Alibaba to test the benefits of—and recommend a solution for—presenting buyers the optimum variety of products available for purchase with individual online retail stores.

Human-centric algorithm

This year’s winning research focused on workers’ bin packing at Alibaba’s warehouse to test a human-centric algorithm. Conventional bin-packing algorithms prescribe which items to pack in which sequence in which box or bin. All the while, they focus on the best use of a bin’s volume. Here’s the rub: Those algorithms tend to overlook how humans might deviate from the plan.

“Today, the adoption of artificial intelligence (AI) and robotics is accelerating and revolutionizing business operations by augmenting human work,” Zhang and co-authors wrote in their award-winning paper.

“Indeed, rather than striving for autonomous automation, we believe that AI and robotics can improve human work by providing more decision support while always empowering human judgment, oversight and discretion.”

A panel of judges evaluated each of the 19 papers submitted this year for consideration for the Olin Award.

“The topic of the paper and applicability to business are very relevant as e-commerce continues to grow as a business channel in the United States and globally,” one judge wrote about Zhang’s paper. “Understanding how to save time on packing at warehousing is very relevant” and could deliver high savings for big operations like Alibaba and Amazon.

“This is a truly stellar paper,” another judge wrote.  “The issue addressed—how to anticipate human modification of computer algorithms in their work—is a large one across many sectors of the economy.  The randomized, controlled nature of the study makes the conclusions that much stronger. Well done.”

Zhang will be recognized at a luncheon on April 1, where he will have the opportunity to present his research.

Zhang’s co-authors are Jiankun Sun of Imperial College Business School, Haoyuan Hu of the Alibaba Group and Jan A. Van Mieghem of Northwestern University.


Olin Professor Phil Dybvig joined a select group of foreign experts last week in a meeting with Chinese Premier Li Keqiang. The annual event has very high visibility in China, part of a series of events wrapped into Chinese media coverage of the lead-up to the Spring Festival Celebration—the lunar New Year.

Dybvig is WashU Olin’s Boatmen’s Bancshares Professor of Banking and Finance and Director of the Institute of Financial Studies at the Southwest University of Finance and Economics in Chengdu, Sichuan, China. He was invited to the event, offering insights and ideas to the Chinese premier, by a member of China’s State Administration of Foreign Experts Affairs. That body certifies foreign experts who provide expertise on the Chinese mainland.

Olin’s Phil Dybvig (blue patterned jacket) among a group of academics and experts invited to share insights at a symposium in January 2020 with Chinese Premier Li Keqiang (image captured from Chinese state video).

Dybvig was flanked at the event by Peter D. Lund from the department of applied physics, New Energy Technologies Group at Aalto University in Finland (on his left) and Jean-Mark Bovet, executive senior vice president, Cirrus Pharmaceuticals Inc., who has a PhD in chemistry from the University of Michigan.

“The premier thanked the foreign experts for their service and solicited their advice on subjects such as improving research in China, speeding technological development and improving education,” Dybvig wrote to the Olin Blog after the series of meetings ending on Friday, January 17, 2020.

See a video from Chinese state media giving an overview of the symposium.

Chinese Premier Li Keqiang (public domain image from Wikipedia)

Dybvig said the Chinese premier—the top administrator of the government’s massive civil service bureaucracy—hosted about 60 foreign experts for the meeting. “There were a lot of smart people there, including some Nobel laureates,” he said. Some were business people, some school administrators, but most seemed to be scholars.

“The premier gave a warm welcome to the foreign experts and thanks for our contributions to China,” he said. “He also talked about Chinese plans, including a commitment to spend 4% of GDP on education even though that implies cutting spending on other things.”

“It was also fun chatting with all the other smart people in attendance,” Dybvig said. “I enjoyed learning from Gérard Mourou about the work on high-intensity short-duration lasers that lead to his Nobel Prize in physics.”

Pictured above: Olin’s Phil Dybvig (blue patterned jacket) in a screen grab from Chinese state television covering a January 2020 symposium with Chinese Premier Li Keqiang with academics working in the country.

The effects of the African slave trade persist today among firms in parts of the continent, with companies more often tightly controlled by individuals or families—often because those firms have limited access to equity funding and shared ownership.

Meanwhile, firms in African countries less affected by the slave trade have more diversified ownership structures.

Lamar Pierce
Lamar Pierce

While closely held ownership isn’t necessarily bad, research from a WashU Olin professor suggests some African firms may miss 21st century growth opportunities without the ability to raise capital through shared ownership.

“The slave trade appears to predict ownership structure in ways that nothing else can explain,” said Lamar Pierce, Olin professor of organization and strategy and coauthor of the new study.

In particular, the research showed that manufacturing firms—heavily dependent on investment capital through debt or equity—tend to have much more closely held ownership structures in countries heavily affected by slavery, primarily in western and central Africa.

“Although ownership concentration can be very useful, not having the option to diversify ownership is bad,” Pierce said.

Pierce and his coauthor, Jason A. Snyder of the University of Utah, outline their conclusions in “Historical Origins of Firm Ownership Structure: The Persistent Effects of the African Slave Trade,” forthcoming in the Academy of Management Journal.

The work builds on the pair’s August 2017 research in The Review of Financial Studies, which showed that firms in countries heavily affected by the slave trade now have more limited access to forms of financing such as bank loans or lines of credit.

That research, in turn, builds on work from other researchers who created a database linking nearly 81,000 enslaved people to 52 modern African countries. Pierce and Snyder cross-referenced that data with extensive data on firms from the World Bank Enterprise Survey.

‘Business scholars aren’t studying Africa’

Pierce said he and Snyder could not definitively say the slave trade caused the later concentration of corporate ownership. But no other variable they investigated could explain the relationship, including weather, colonialism, natural resources such as gold or oil, access to coastlines or the distance to demand markets.

And there is some evidence that the relationship is indeed causal.

“One thing that raises our confidence is that a whole bunch of historians have studied this,” Pierce said. The researchers’ model suggests that 67% of firms in countries with above-median slave exports would have sole proprietorship. In contrast, countries below the median for slave exports have 46% sole ownership.

Furthermore, it implies that the difference in the percentage of sole proprietorships between the lowest and the highest slave trade countries is 43 percentage points.

Pierce’s and Snyder’s work is early in a burgeoning area of business research focused on the African continent.

“Business scholars aren’t studying Africa. They just aren’t,” Pierce said. “It’s an incredibly rapidly growing continent economically. Exploding literacy rates, dramatically improving political institutions.”

Although some question whether this research can be generalized beyond Africa, he wonders whether it needs to be, given that the continent represents one-sixth of the world’s population.

“I never hear that question when I do research on US firms. It’s a valuable question to ask, but not when it comes to questioning the validity of the research,” he said. “Understanding the role of firms is important in and of itself.”

‘Traumatic shock’

In this and their previous research, Pierce and Snyder set out to understand the lingering effects of a massive “traumatic shock” that reduced the continent’s population by half between the 15th and 19th centuries, when 12 million to 18 million Africans were seized into slavery.

Their 2017 paper provided “the first evidence that the slave trade shaped modern markets by restricting financial contracting between firms,” Pierce and Snyder wrote. “More specifically, they show that firms cannot access credit or banking services.”

This new paper suggests that African nations historically affected by the slave trade tend to have weak institutions that are unable to enforce the existence of contracts. Because they also have weaker and more concentrated social networks and trust, “ownership must remain concentrated even when not beneficial.”

Pierce and Snyder wanted to build on a call within the research community to advance research on African business and “to bring history back into the fields of management and strategy.”

“If you eyeball the variation in economic development as a function of the slave trade and you look at the low-slave-trade countries,” Pierce said, “you can see a huge difference in them.”