Tag: Faculty



A Kickstarter project for a cool new card game promises donors a free game for a $100 donation. When are you more likely to contribute — before or after the project reaches its funding goal?

Conventional wisdom (and some economics research) suggests that once the project is funded — ensuring it can move forward — that’s when donors are even more likely to lock in their chance for a free reward. They’ll follow the “herd” toward the projects other donors have marked with their stamp of approval.

Dennis Zhang

Instead, a forthcoming paper from an Olin researcher shows otherwise: Projects actually raise money faster just before they reach their funding goal. The result is a revelation in an industry that raised more than $5.2 billion across more than 6.4 million fundraising campaigns worldwide last year, according to Statista, a market and consumer data site.

“It’s about the tendency of helping people,” said Dennis Zhang, assistant professor of operations and manufacturing management and coauthor of the paper, “Prosocial Goal Pursuit in Crowdfunding: Evidence from Kickstarter.com,” accepted for June publication in the Journal of Marketing Research.

“Are people purchasing stuff to get a discounted price or because they want to contribute to a campaign and help the owner succeed?” Zhang asked. “After the goal is reached, you’re not one of the reasons this project has succeeded.”

According to the research paper, written with Hengchen Dai from the University of California, Los Angeles, the effect is even more pronounced among projects that have a stronger “pro-social” component. In other words, they evoke a stronger sense among donors that they’re helping someone fulfill a dream.

The researchers found that Kickstarter projects involving art or music tend to have stronger “pro-social” scores, for example. Projects involving electronics are much lower. Games fall somewhere in the middle.

Method and results

In their work, the two researchers used a combination of methods, starting with raw data scraped from nearly 29,000 Kickstarter crowdfunding projects from September 2016 to August 2017. They combined analysis of that data with a qualitative analysis of a sampling of projects in order to gauge the level of “pro-social” motivation they elicited.

In fact, for the qualitative analysis, it was as simple as investigating which project creators literally asked for help from donors in the short description of the project — and whether the project was developed by a single person or a group of people.

Projects that exceeded 105 percent of their goal spent 2.4 times longer on their trek from 100 to 105 percent than they did from 95 to 100 percent of their goal. The researchers said the phenomenon existed as they widened or narrowed the range as well — in other words, they observed the same speed differential between 99 and 101 percent of goal or from 90 to 110 percent of goal.

Projects also got new backers faster — and donations were larger — before reaching their goal.

“Specifically, the average time it took a project to gain a new backer during the 100 percent to 105 percent period was 1.84 times as long as it took during the 95 percent to 100 percent period,” the researchers wrote. “Average contribution size decreased by 19 percent during the 100 percent to 105 percent period, relative to the 95 percent to 100 percent period.”

The power of helping

All of these effects were magnified for projects developed by an individual who specifically used the word “help” in the project’s description. For example, one project noted, “The saga continues! Help us print Kamikaze Volume 2 and SoundBox, a thrilling spinoff comic.”

Another asked donors to “help make the iconic image of the Mickey Monster become a vinyl toy with moveable head and arms!” Others succeeded by indicating their intention to help others: “A sustainable business to help the people of Kosrae, Micronesia: Creative passion, ethical mission, incredible story.”

Zhang said the research findings have implications for both the project creators and the platforms they use to raise money — platforms like Kickstarter, Indiegogo, Patreon, and GoFundMe.

“From a managerial perspective, if you’re a creator, you have to tailor your campaign to evoke pro-sociality. What you should emphasize is important,” Zhang said. “And from a platform perspective, it’s important. We are suggesting that projects that are below the goal are more appealing that those that are above the goal.”

Thus, crowdfunding platforms might consider making it easier for site visitors to find the projects that are nearing their goals.

“I take this as an example of how when designing an economic system, non-economic factors matter,” Zhang said. “It’s also driven by psychology. It’s an argument that behavioral economics matters.”




The CNN op-ed by Gopalan, Horn, Milbourne.

The CNN op-ed by Gopalan, Horn, Milbourne.

This is an excerpt from a CNN Business commentary written by Olin’s Radhakrishnan Gopalan, John Horn, and Todd Milbourn, applying their research and conclusions from a Harvard Business Review article to a current news story.

At a time when governments are struggling to find broad and economically workable responses to climate change, Royal Dutch Shell announced in early December that it would tie executive compensation to short-term carbon emissions targets in 2020. Whether this was a purely altruistic move aimed at corporate social responsibility or a response to investor pressure, it’s more likely to affect Shell’s greenhouse gas emissions than any press release or quarterly earnings statement.

As we explained in a Harvard Business Review article, data from almost 1,000 firms strongly indicate that, on average, CEOs and other senior executives manage to the targets set in their compensation packages.

The upside: Compensation incentives work. The downside: If designed incorrectly, these pay-for-performance contracts can incentivize perverse behavior. The research shows that, more often than not, executives manage up to the target and stop, and some purposefully adjust costs in order to meet the performance goal.

However, companies can take steps to minimize the downside risk. They can use multiple metrics; increase payouts at a constant rate and adjust for risk; reward performance relative to competitors; and include nonfinancial targets.

Shell is implementing two of these four with its new pay-for-performance scheme: multiple metrics and nonfinancial targets.

Read the full op-ed from the Olin professors on CNN Business’s website.

Gopalan is professor of finance at the Olin Business School and academic director of the IIT-Bombay-Washington University Executive MBA program. Horn is a professor of practice in economics. Milbourn is vice dean and Hubert C. & Dorothy R. Moog Professor of Finance.




I have the pleasure of announcing several important Olin faculty promotions:

Cynthia Cryder (associate professor of marketing) has been granted tenure by the University Board of Trustees.

Andrew Knight (professor of organizational behavior) has been granted tenure by the University Board of Trustees and promoted to full professor as well.

LeBoeuf

Manela

Robin LeBoeuf has been promoted to full professor (marketing).

In addition, Olin and university leadership have approved Asaf Manela (associate professor of finance) for tenure, and his case will go to the University Board of Trustees in early spring.

Congratulations to Cynthia, Andrew, Robyn and Asaf— you are important assets to the Olin community.




Rik Nemanick

Rik Nemanick

Rik Nemanick, a Washington University adjunct instructor, wrote this for the Olin Blog. He is the author of The Mentor’s Way: Eight Rules for Bringing Out the Best in Others and is leading an upcoming daylong workshop on mentoring and leader development at Olin. This is the third in a series of Olin Blog posts on mentoring. Check out part one and part two if you missed them.

This blog post concludes my discussion about mentoring as a vehicle to extend and enhance learning. The series of posts is based on interviews with seven alumni from the School of Engineering and Olin Business School who have been mentors for students at Washington University. In my prior blog posts on mentoring, I brought together their ideas to build a definition of what a mentor was and explored what mentors do to help bring out the best in others.

In this post, I wanted to know what they suggest people do to get the most out of having a mentor.

It is important for protégés to feel empowered to “take the lead” with their mentors. Recognize that leaders around you are willing to help. “Don’t hesitate to reach out to people,” said Dante Cannarozzi, BSAS ‘01/MSCS ‘03. “I think you’ll discover most people are very receptive to being asked for advice.”

Sally Roth, EMBA ‘95, added to that advice, encouraging protégés to “be prepared to own the relationship. That is, it is incumbent upon the protégé, not the mentor, to build and maintain a trusting relationship.”

Mike Ferman, BSBA ’68, suggested protégés “set expectations with your mentor upfront. Identify how you should both communicate with each other and how frequently. Do not expect them to do things for you.” Haroon Taqi, BSCS ’90/MSCS ’95, encouraged protégés to “reach out to them and follow through to make sure that the meetings happened.”

Of course, you should also “know what you want to optimize” about yourself, observed Mark Pydynowski, BSBA ’04. He added that “the best mentors have expensive time; do not waste it by being unprepared.” That is why it is important for protégés to “chart a course” for their development journey. Think about where you see yourself in three years and get your mentor’s help in identifying what you want to learn or improve to get there.

Once you figure out what you want to learn, it helps to “open your mind” to learning. David Murphy, EMBA ’18, said that “you need to listen for your internal biases and turn them off. You’re actively seeking out growth, which may require you to learn to identify and focus on your weaknesses.”

Ferman added that protégés need to be “open to change and listening to new ideas. Being open and transparent with them about your goals and objectives, and my fears and concerns.” Finally, to truly grow and learn when working with a mentor, it helps to “stretch yourself” and take some risks. Murphy suggested that “getting out of your comfort zone and out of your own way are crucial steps in true growth.”

One thing to make sure you do is thank your mentors and let them know the impact they had on you. Taqi said that “in the end, I made sure I thanked them for their time.” Mentoring is a gift that you cannot repay. What you can do is make sure that the time the mentor invested in you made a difference. And, you can look for someone you can mentor and “pay it forward.”

“Mentorship & Leader Development,” a workshop presented by Olin Business School Executive Education, will be Nov. 6 from 8 a.m. to 4 p.m. Get more details and register. Nemanick is author of The Mentor’s Way.




Former WashU Olin Business School Dean Robert Virgil was honored as an “ageless, remarkable St. Louisan” by a prominent local nonprofit dedicated to improving living conditions for at-risk seniors.

Virgil, who was Olin’s dean from 1977 to 1993, is part of a class of 14 so-honored this year by the St. Andrew’s Charitable Foundation. The organization recognizes a new class each year of individuals 75 years old and up “who are actively making a tremendous impact in St. Louis through philanthropy, volunteerism, and leadership. These awe-inspiring individuals are proof positive that, at any age, we can make a difference in our community and the lives of others.”

Virgil was recognized with the other honorees at a gala on October 20 at the Hyatt Regency St. Louis at the Arch, hosted by St. Louis Public Radio’s Don Marsh. This is what the organization had to say in its write-up about 84-year-old Dean Virgil.

Bob likes to say that he has had careers with two of the world’s finest institutions, Washington University and Edward Jones. At Washington University beginning in 1960, he taught accounting to hundreds of students and from 1977-1993, was dean of the John M. Olin School of Business.

He has had numerous other roles in the university, including chairing the highly successful scholarship segment of the recently completed Leading Together campaign.

In 1993, Bob joined Edward Jones where he had responsibility for management development and was a member of the firm’s management committee. He retired as a general partner in 2007.

Bob has been involved actively with several organizations in the St. Louis community. Among them are Girls, Inc. of St. Louis, the Magic House, City Academy, Harris Stowe State University, and the Donald Danforth Plant Science Center. Gerry and Bob enjoy four grown children, 12 grandchildren, and their pup, Maisie.

The 2018 class of “ageless, remarkable St. Louisans” also includes: Jorge M. Alegre, M.D.; Margaret (Marge) Aylward; Mariann Laue Baker; Shirley and Charles Drury, Sr.; Paul J. Gallant; Dr. Ron Gregory; Carol Powell; Jay C. Rickmeyer; Harvey G. Schneider; Mary Ann and Richard Shaw; and Ted C. Vargas, M.D.




Cliff Holekamp

One day, we may think of the Holekamp family as the Johnny Appleseed of Olin’s startup ecosystem.

Thanks to a $500,000 gift from Cliff Holekamp and his father Bill Holekamp, known as the Holekamp Seed Fund, Olin now offers up to 20 grants a year of $1,000 to students who need a small injection of capital to get a startup business off the ground.

“I’m just interested in having all of our entrepreneurship students take action on their ideas and that they have the support to pursue a passion,” said Holekamp, professor of practice in entrepreneurship and academic director for entrepreneurship at Olin.

The idea for the Holekamp Seed Fund grew out of his experience with startup competitions, which typically hear from a variety of student proposals, but only reward one or two with funding. “The thought is to flip that around,” Holekamp said. “What if we were to think of it as seeding a large number of students with small checks? It’s about moving a student to action.”

It’s Holekamp’s dream that these relatively small grants will stimulate an even more vibrant startup scene on the WashU campus. The outline for the Holekamp Seed Fund suggests that the next Varsity Tutors, Schoology, or ePharmix—established firms that launched as student-run startups—will get their first investment from Olin.

He only asks for two things of the students.

First, he expects students to demonstrate a serious commitment to launching their idea. Applications won’t be judged on the potential long-term viability of the idea, but rather on how passionate the student is about giving the idea a go.

One reason for that stipulation? Eventually, students may learn their idea isn’t viable. Or, perhaps, they’ll uncover a better, more promising opportunity along the way. “Entrepreneurship should be liberating,” Holekamp said. “It shouldn’t be a cage.”

Second, Holekamp will ask recipients of the $1,000 grants to consider paying them forward after they’ve had a chance to pursue their own idea. Though not a requirement, he hopes students will consider pledging $200 a year over five years back to the seed fund or to the Olin Annual Fund.

“I’m not aware of any other schools doing something with this ‘pay-it-forward’ element,” he said. “I know of schools that do loans or give out cash prizes.” The component of building a vibrant startup community on campus was important to the Holekamp family’s conception of the idea.

“The idea behind this fund is wonderfully innovative—befitting Cliff, his family, WashU and the entrepreneurial spirit of the St. Louis community,” Dean Mark Taylor said. “This fund will provide a nudge to student entrepreneurs and it may well entice them as successful alums to likewise lend a hand to students who follow them. It’s an innovation win-win.”

Students can apply on the Holekamp Seed Fund website with the expectation that they will have a face-to-face interview with Holekamp. Grants will be awarded on a rolling basis, so students can apply at any time. A three-person panel—Holekamp; his father, Bill; and Elise Miller Hoffman, MBA ’16, and principal at Cultivation Capital—will review applications. They’ll be assuring the applications come from Olin students who are ready to incorporate as a business and can demonstrate a personal commitment to the idea.

Applicants must have completed at least one semester in an Olin graduate program or course, or they must be a rising junior who is majoring in business or has participated in an Olin entrepreneurship course.

“It’s enough to get them motivated, get started, get incorporated and begin creating something,” Holekamp said. “Sometimes the hardest milestone is the first—going from nothing to something.”