Economics – Page 69 – artdiamondblog.com

Jury Out on Whether Bossless Zappos Will Succeed

(p. A1) Brironni Alex was so good at answering telephone calls and emails from customers at Zappos.com Inc. that the company promoted her to customer-service manager.
But when the online retailer adopted a management philosophy called Holacracy, she lost her job title and responsibility for performance reviews. Since the end of April, Zappos has zero managers to oversee employees, who are supposed to decide largely for themselves how to get their work done.
“I am managing the work, but before I was managing the worker,” says Ms. Alex, 26 years old, now part of a team implementing Holacracy throughout Zappos. Ex-managers haven’t been guaranteed another job and could have their pay cut next year, though Zappos says that is unlikely. Ms. Alex says the changes give her more time for a workplace diversity committee and to perform on the Zappos dance team.
The shake-up has been jarring even for a company famous for doing things differently. Earlier this month, Zappos said about 14%, or 210, of its roughly 1,500 employees had decided Holacracy wasn’t for them, and they will leave the retailer.
They were offered at least three months of severance pay by Zappos Chief Executive Tony Hsieh, who wrote in a 4,700-word memo in March that the company hadn’t “made fast enough progress towards self-management.”
. . .
(p. A10) Mr. Hsieh, 41, concedes that Holacracy “takes time and a lot of trial and error.” He still has faith that the system empowers employees “to act more like entrepreneurs” and stokes faster “idea flow,” collaboration and innovation, he says.
. . .
Research shows that the value of flat organizations is mixed, though highly motivated workers who thrive on creativity generally are best suited for going bossless.
The results at Zappos will be watched closely because it has long embraced employee independence even while striving to meet exacting customer-service standards. “Delivering Happiness,” a 2010 book by Mr. Hsieh, was a best seller and spawned a management consulting firm.
. . .
“They are adopting Holacracy as more how to get to the next level, as opposed to how to fix something broken in their system, which is actually one of their unique challenges,” says Brian Robertson, 36, the inventor of Holacracy. The term comes from the word “holarchy,” coined by writer Arthur Koestler for self-organizing units that combine to form a larger organization.

For the full story, see:
RACHEL EMMA SILVERMAN. “Going Bossless Backfires at Zappos.” The Wall Street Journal (Thurs., May 21, 2015): A1 & A10.
(Note: ellipses added.)
(Note: the date of the online version of the story is MAY 20, 2015, and has the title “At Zappos, Banishing the Bosses Brings Confusion.”)

Ed Telling’s Band of Irregulars Had the Freedom to Perform

(p. 482) . . . Bill Sanders, Charlie Bacon’s replacement as the head of corporate personnel, . . . had once served Telling in the East despite having hair that flowed far below his ears. Sanders had grown his hair out in order to irritate an old-school store manager who exercised his sovereign rights by refusing to hire any man not sporting a crew cut. The fact that Telling never told Sanders to cut his hair was an early indication to others in the East that Ed Telling was much more interested in people who could do the job and who exhibited a healthy contempt for the status quo than he was in appearances.
. . .
(p. 492) It was more than dumb luck that his band of loyalists happened to include several supersensitive and insecure men, some deeply religious men, some obsessively ambitious men, several quite short men, and others, from secretaries to former window-dressers, who never fit into the status quo until Ed Telling discovered them and helped them flourish among his private band of irregulars. Along the way, the Eastern Territory troupe was joined by others. Whether they were bright-button kids from Utah itching to accomplish an act that truly counted on a large scale, or frustrated wordsmiths so enamored of the metaphors of power that the practice of management appeared to them in Biblical panoramas, they all had a part. All irregulars were welcome, and in his quiet way Ed Telling played them all. Telling could sense through instinct which people were willing to submit and which ones were willing to fight. Far from being unaware of his motivational skills, Telling would on occasion call Pat Jamieson into his office after one of his managers left, then convey to Pat the elliptical words he’d uttered to the manager, and predict the number of days it would take the officer to come back with the problem ironed out. He was rarely off by more than twenty-four hours. He said his management style involved giving subordinates a great deal of freedom, “the freedom,” he called it, “to perform.”

Source:
Katz, Donald R. The Big Store: Inside the Crisis and Revolution at Sears. New York: Viking Adult, 1987.
(Note: ellipses added.)

Having Your Intellectual Property Stolen, Modifies Your Views on Piracy

(p. C18) Dear Dan,
My nephew has been downloading music and movies illegally from the Internet. Without sounding self-righteous, how can I get him to respect intellectual-property rights?
–Patricia
My own view on illegal downloads was deeply modified the day that my book on dishonesty was published–when I learned that it had been illegally downloaded more than 20,000 times from one overseas website. (The irony did not escape me.) My advice? Get your nephew to create something and then, without his knowing, put it online and download it many, many times. I suspect that will make it much harder for him to keep up his blithe attitude toward piracy.

For the full advice column by Dan Ariely, professor of behavioral economics at Duke , see:
DAN ARIELY. “ASK ARIELY; It’s Risky to Rely on Retirement Questionnaires.” The Wall Street Journal (Sat., May 23, 2015): C18.
(Note: italics in original.)
(Note: the online version of the advice column has the date May 22, 2015.)

Sears Democratized the Washing Machine

(p. 301) The pieces of a new dream had finally been drawn in–big, diverse businesses that could combine as a sum greater than the proverbial parts. Now Sears could continue to “democratize” products that were previously too expensive or sophisticated for everyday people.
The automatic washing machine was an artifact owned only by the rich until Sears democratized the machine in 1942: $37.95–three bucks down and four more a month on time. The process was at the core of the entire industrial revolution-the humbling of products: buckles, buttons, and beer–and the efficient distribution of previously unattainable things to the huge pools of human desire called markets. Now the possibility stood before them of starting the cycle all over again.
Sears could spin a grand, gilded net for the people that included housing, mortgages, all manner of insurance, variations on banking sources, investment services, and, of course, consumer goods. People could get a house from Sears again. When the system was up and running, they could even get the money to buy the house; get the stuff that goes in the house; and the services that ensure the sustenance of the house if something unforeseen happens.

Source:
Katz, Donald R. The Big Store: Inside the Crisis and Revolution at Sears. New York: Viking Adult, 1987.

Merton Miller Applauded Bankers Who Cleverly Evaded Government Interference with Free Markets

(p. 12) . . . Merton Miller, a Nobel laureate economist at the University of Chicago, . . . was in many ways the father of financial innovation. Miller praised complex financial instruments, in large part because they helped institutions avoid the law. He applauded bankers for cleverly avoiding government attempts to interfere with markets.

For the full review, see:
FRANK PARTNOY. “Societal Bonds.” The New York Times Book Review (Sun., MAY 10, 2015): 28.
(Note: ellipses added.)
(Note: the online version of the review has the date MAY 8, 2015, and has the title “‘Smart Money,’ by Andrew Palmer.”)

A Highly Mathematical Model Endorses Friedman’s View that Feds Directed Economics toward Highly Mathematical Models

(p. 1138) . . . , in many areas, the existing organization of research is characterized by large research institutions staffed with hundreds of
researchers and national funding agencies who set the research agenda for the field. Given the size of such institutions, if they decide to launch a new research program, then the critical mass of scholars can be reached with certainty, and individual researchers need not fear the coordination risk. Researchers should thus choose to work on that research topic, provided that they perceive an expected reward that is larger than s. (p. 1139) Unfortunately, if the large institution selects a poor idea (with a small or even negative θ), it would then be responsible for the emergence of a strand of research with modest scientific value. As an example, Diamond (1996) recalls Milton Friedman’s criticism of the U.S. National Science Foundation, which, in his opinion, has directed the economics profession toward a highly mathematical model.12
. . .
12. Ironically, his opinion is endorsed in this paper by a “highly mathematical model.”

Source:
Besancenot, Damien, and Radu Vranceanu. “Fear of Novelty: A Model of Scientific Discovery with Strategic Uncertainty.” Economic Inquiry 53, no. 2 (April 2015): 1132-39.
(Note: ellipses added; italics in original.)

The 1996 Diamond article mentioned above, is:
Diamond, Arthur M., Jr. “The Economics of Science.” Knowledge and Policy 9, nos. 2/3 (Summer/Fall 1996): 6-49.

Ed Telling’s Nimble, Intuitive Labor Decisions at Sears

(p. 49) Telling rarely gave a direct order, so the Searsmen near him knew they had to listen hard and learn to read his arcane signals. You had to understand his gnomic comments and apparent throwaway lines, for you would only hear what Telling thought about something twice. The requirement made people scared, because the third time he spoke you were gone. “No need to beat a horse if he’s not able to pull,” he’d say. “Let’s get another horse.”
He had a habit he said he couldn’t do anything about of judging the utility and character of a man the first time he looked into his eyes. Quick-draw decisions like this were a part of the general managerial ethos at Sears. The practice might have descended from the store master’s knack for spotting at fifteen paces a shopper in the mood to spend freely.

Source:
Katz, Donald R. The Big Store: Inside the Crisis and Revolution at Sears. New York: Viking Adult, 1987.

Skill Differences Cause Four Times Inequality as Wealth Concentration

(p. A25) “What I find destructive,” says David Autor of the Massachusetts Institute of Technology, “is the message that if you don’t get into the top 1 percent then you’re out of the game. That’s deeply, deeply incorrect.”
Autor’s own research shows that skills differences are four times more important than concentration of wealth in driving inequality. If we could magically confiscate and redistribute the above-average income gains that have gone to the top 1 percent since 1979, that would produce $7,000 more per household per year for the bottom 99 percent. But if we could close the gap so that high-school-educated people had the skills of college-educated people, that would increase household income by $28,000 per year.

For the full commentary, see:
David Brooks. “The Temptation of Hillary.” The New York Times (Fri., MARCH 6, 2015): A25.

Studebaker Competed with “Unique Designs and Powerful Engines”

“Greg Lange, 53, with his two-tone 1955 Studebaker President, near his home in Edmonds, Wash.” Source of caption and photo: online version of the WSJ article quoted and cited below.

(p. D4) I’ve always rooted for underdogs.

. . .
Studebaker wasn’t a big Detroit corporation. It was a smaller company out of South Bend, Ind., and had to be highly imaginative to compete with Ford and General Motors. This resulted in unique designs and powerful engines. The one in my President is called a Passmaster (a 259 cubic inch V8); the meaning is obvious.

For the full interview, see:
Greg Lange as told to interviewer A.J. BAIME. “Studebaker: President Still in Office.” The Wall Street Journal (Weds., April 8, 2015): D4.
(Note: ellipsis added.)
(Note: the online version of the interview has the date April 7, 2015, and has the title “Studebaker: Still Stands Out After 60 Years.” Where the online version differs from the print version, the quoted passage follows the online version.)

Voters Want Texas-Style Economic Dynamism

(p. A23) Surveys and interviews give us some sense of what’s going on. Voters have a lot of economic anxieties. But they also have a template in their heads for what economic dynamism looks like.
That template does not include a big role for government. Polls show that faith in government is near all-time lows. In a Gallup survey, voters listed dysfunctional government as the nation’s No. 1 problem. In fact, American voters’ traditional distrust has morphed and hardened. They used to think it was bloated and ineffective. Now they think it is bloated and ineffective and rigged to help those who need it least.
When many of these voters think of economic dynamism, they think of places like Texas, the top job producer in the nation over the past decade, and, especially, places like Houston, a low-regulation, low-cost-of-living place. In places like Wisconsin, voters in the middle class private sector support candidates who cut state pensions and pass right-to-work laws, so that economic governance can be more Texas-style.

For the full commentary, see:
David Brooks. “The Field Is Flat.” The New York Times (Fri., MARCH 27, 2015): A23.