http://www.tuck.dartmouth.edu/news/articles/ en Scott.P.Fletcher@tuck.dartmouth.edu Copyright 2013 2013-04-26T14:08:15+00:00 http://www.tuck.dartmouth.edu/newsroom/articles/nobel-laureate-in-economics-talks-unemployment-and-debt http://www.tuck.dartmouth.edu/newsroom/articles/nobel-laureate-in-economics-talks-unemployment-and-debt The United States has a lot of problems, but none as dire as the country’s current “crisis” in unemployment, said Peter Diamond, a Nobel Prize-winning economist who visited Tuck May 15 to deliver a talk entitled “Unemployment and Debt.” Diamond, a 1930 Fellow at the Nelson A. Rockefeller Center for Public Policy at Dartmouth, came to Tuck as part of the Global Insights Distinguished Speaker Series, organized by the Center for Global Business and Government. He, along with Dale T. Mortensen and Christopher A. Pissarides, won the Nobel Memorial Prize in Economic Sciences in 2010 for their development of frameworks that could answer two important questions: Why are there many job openings but also many unemployed people, and how can economic policy affect unemployment? In Diamond’s view, policy makers in Washington, D.C., have their priorities turned around. They consider the high debt-to-GDP ratio a crisis that must be addressed immediately, and relegate unemployment to the pile of national concerns that can wait until later. “My view is exactly the opposite,” he said. “We have an unemployment crisis, something that ought to be addressed right away, and we have a debt problem.” A crisis, according to Diamond, is basically a problem with an acute urgency, and he argued that unemployment in the U.S. meets that criterion because of its severe and long lasting effects on the economy. He highlighted two examples to prove his point: the scourge of long-term unemployment and the diminished prospects for young people entering the job market today. The long-term unemployed consist of people who have been out of work for at least six months. For most people, being without a job for six months casts an irrevocable pall on the rest of their career. “On average, when they come back to work, they will have a 30 percent wage cut that will last for the rest of their lives,” Diamond said. “Many of them have left the labor force and won’t come back at all.” This is not only bad for workers and their families; their lost productivity drags down the economy for years. Young people ready to join the workforce have a similar but distinct challenge. In normal times, young workers see their wages rise rapidly until their mid-30s, something that economists say is due to the accumulation of experience and skills, and their discovery of the right job for their abilities. But what happens when this demographic emerges from college during a recession? “It impacts the earnings curve so that there are lower earnings for a decade after you leave school,” Diamond said. “The longer we go on with high unemployment, the more we’re going to have people suffering this pattern for years into the future.” Diamond admitted that his solution to the unemployment crisis is nothing new: economic stimulus that will drive growth. Specifically, Diamond recommends investments into long-term infrastructure projects—such as the U.S.’s ailing bridges, tunnels, and roads—and into workforce education and basic research. While those investments should begin as soon as possible, Diamond opined that the problem of the national debt should be addressed with more deliberation. That’s because the nation’s debt-to-GDP ratio hasn’t risen to the level where bond-holders are worried about the government’s ability to pay them back. “The U.S. is viewed as unusually safe for good reason,” he said: “We have enormous potential capacity for raising taxes and addressing the debt, something that would be much harder in Greece or Italy.” For Diamond, the way to avoid a debt crisis is obvious: reform Social Security. “It’s money-in, money-out,” he said, “and we know how to fix it.” He added that social security is a revered safety net, and nobody is afraid that it will go away, so reforming it inherently has more credibility than do oft-proposed spending cuts. In sum, Diamond said, “put policies in place that will actually happen and that will phase in slowly so don’t they hurt unemployment and yet have a sig impact on future debt. That’s a good thing to do, but we don’t have to do it right away.” Economics, School News, 2013-05-17T14:43:30+00:00 http://www.tuck.dartmouth.edu/newsroom/articles/professor-andrew-king-and-scott-neslin-recognized-for-teaching-excellence http://www.tuck.dartmouth.edu/newsroom/articles/professor-andrew-king-and-scott-neslin-recognized-for-teaching-excellence The path to graduation for every member of Tuck’s class of 2013 led through strategy and management professor Andrew King’s core Competitive and Corporate Strategy course. It turns out many students were perfectly happy with that. {media1}King was chosen as one of two winners of this year’s Teaching Excellence Award, sponsored by a gift from the class of 2011. The award is presented each year to two professors deemed outstanding by the graduating class: one for teaching in the core and another for teaching an elective. Scott Neslin, the Albert Wesley Frey Professor of Marketing, received this year’s award for his work in his Database Marketing elective. “Professor King has a tremendous amount of energy,” said Jessica Zofnass T’13, who headed the award’s 11-member selection committee. “He really went over and above what we expected and was able to inspire us. He memorized every single person in our class by name and went out of his way to make our Tuck experience special.” Students praised King’s control of the classroom and his efforts to solicit feedback to improve his teaching. “I know the quality of other core teachers here at Tuck, so this award comes as a surprise,” said King. “I am especially honored to receive it from the class of 2013, because for many of its members I have both affection and admiration. I can’t wait to see where they go, and I hope to have them back soon as guest speakers in my course.” {media2}Many students, meanwhile, cited Neslin’s course, Database Marketing, as instrumental in shaping their career paths. “He had an amazing ability to make the most complicated issues really understandable,” said Zofnass. “People felt he was incredibly devoted to his trade. He was always available to his students and was willing to spend as much as four hours with them working one-on-one. His enthusiasm and excitement was really contagious.”  Neslin said he was humbled to receive the award. “It exemplifies the culture of support that permeates Tuck,” he said. “I stood on the shoulders of the encouragement, generosity, and hard work of project clients, teaching assistants, administrators, guest speakers, and the students themselves who, through their enthusiasm and talent, elevated the level of learning in this course.” The winning faculty, chosen by the selection committee based on nominations from 197 members of the class of 2013, will deliver “Last Lecture” classes during Friends and Family Day June 7. Previous winners include Matthew Slaughter, associate dean for faculty and the Signal Companies’ Professor of Management; Joseph Hall, visiting associate professor of business administration; accounting professor Phillip Stocken; and Ron Adner, professor of strategy and entrepreneurship. School News, 2013-05-16T13:26:04+00:00 http://www.tuck.dartmouth.edu/newsroom/articles/latin-america-week-highlights-tucks-global-view http://www.tuck.dartmouth.edu/newsroom/articles/latin-america-week-highlights-tucks-global-view Before coming to Tuck, Venezuelan-born Henrique Thielen T’13 spent six years as an industrial engineer at Cemex, a Mexico-based company that is the world’s seventh-largest cement producer. He came to Tuck to broaden his view of global business, and now as a key organizer of the school’s 2013 Latin America Week, May 5-8, he’s helping his peers gain insight on business operations in his native region. “Tuck has given me a much broader perspective on how to do business,” he says. “As a Latin American in the U.S., there is so much you can expand on. Tuck shows you how to do business with a range of international business, governments, and nonprofits. Part of my role is to give back by helping classmates expand their knowledge of Latin America’s business environment.” Latin America Highlight Week, together with April’s Africa Highlight Week, is one way Tuck exposes students to global business perspectives. Despite the slow recovery from the Great Recession in the United States, Latin American and Caribbean economies have created many new opportunities, growing by an average of 4.6 percent from 2010 to 2012. This year’s Latin America Week featured keynote speaker Carlos Rodriguez-Pastor Jr. T’88, a member of the Tuck board of overseers and chairman of Intercorp Peru Ltd., a banking and retailing conglomerate that is among the country’s largest businesses. As an organizer of Latin America Week, and co-director of Tuck’s 70-member Latin American & Iberian Business Club, Thielen had coffee with Rodriguez-Pastor Jr. last fall in Hanover. “He started talking about the things that he has done, not only in his organization but in Peru as a country, and it’s just astonishing,” says Thielen. Representatives of Latin and Iberian companies operating in the U.S. also spoke during the week, which was organized by the Center for Global Business and Government and the Latin American & Iberian Business Club. They included Alejandro Lizcano T’07, director of Northeast and Midwest sales for Telefonica, Spain’s largest telecom company; Caio Rossoni, a vice president with Itaú USA Asset Management, a subsidiary of Brazil-based Itaú Unibanco Holding S.A.; and Alvaro Gomez-Muro, project CEO of Madrid-based Ferrovial S.A.’s LBJ Expressway project in metro Dallas. Latin America’s impact on the U.S. has also been felt politically, as demonstrated by the current debate over immigration legislation in Congress and Hispanics’ key role in re-electing President Obama. In a panel discussion, Ted Alden, the Bernard L. Schwartz Senior Fellow at the Council on Foreign Relations, and Linda Fowler, the Frank J. Reagan '09 Chair in Policy Studies and a professor of government at Dartmouth College, shared their analysis of the political implications of the U.S.’s growing Latino population.  “Helping students showcase regions or themes of interest is very rewarding,” says Lisa Miller, executive director of Tuck’s Center for Global Business and Government. “Events like this truly enrich the MBA experience. Plus, we at the center get to collaborate closely with students, strengthen our network of executives, and learn a great deal about new aspects of doing business around the world.” Thielen’s global business journey will continue after he graduates. He’s accepted a job in Seoul, South Korea, with Samsung Electronics Co. Ltd. “This is an example of how Tuck gives you global opportunities,” he says. “Tuck is one of a small group of core schools they recruit from. When I was selling myself to Samsung, I told them that I see myself as an executive for them one day in Latin America. The plan is they’ll train me in South Korea and maybe someday send me back to Latin America to help the company grow.” School News, 2013-05-13T19:50:17+00:00 http://www.tuck.dartmouth.edu/newsroom/articles/return-to-sender http://www.tuck.dartmouth.edu/newsroom/articles/return-to-sender Most poor countries are badly governed. Economists and political scientists have long debated why this is the case. Some argue that governance is worse in poor countries because they tend to be non-democratic and less accountable to their citizens. Another view holds that the productivity of public services in developing countries is low for similar reasons as that of private firms: low education levels, poor infrastructure and lack of technology.  Still another reason is poor management, which could be the result of patronage in hiring and promotion, low public sector wages that fail to attract talent, and a dearth of incentives, supervision, and monitoring This ambiguity has presented a challenge for government efficiency researchers. Moreover, their usual tool—surveys of citizens—has been ineffective in deciphering which individual factors are in play, since people often lump together a number of different issues together in responding to questions about government efficiency, and tend to mix personal experiences with policy views. Now Nobel Foundation Professor of Finance Rafael La Porta and colleagues have found a new way to measure efficiency through the use of a universal government service: the post office. By sending 10 letters to fake addresses in 159 countries and measuring how long it took for the letters to be returned to Hanover, N.H., La Porta was able to gather data on efficiency in a manner in which neither corruption nor politics would be a factor. He simply measured whether postal employees were doing their job. “It’s an environment where corruption doesn’t matter since a postal employee in the Philippines cannot ask me for a bribe,” says La Porta. “Throwing out the letter also serves no political purpose, so we’re able to better understand the extent to which more capital investment or better management affect efficiency.” In conducting the experiment, La Porta’s team sent two letters to non-existent business addresses  in the five largest cities in each country. Each envelope contained an address listing a common personal name in the country along with a generic business name – such as “Inventory Technology Partners.” The made-up businesses were located on made-up street addresses that used the names of Nobel laureates in economics and famous classical composers, and each envelope contained a single-page form business letter. The return address was listed at the Tuck School of Business along with bold letters stating “Please Return to Sender if Undeliverable.” Since all of the countries in the experiment are members of the Universal Postal Union, their postal workers have the same obligations to return undeliverable mail within one month of it entering the country. In practice, only 59 percent of the letters were returned within a year, and only 35 percent were returned within three months. Countries that returned all of the letters sent to them included not only countries often associated with efficient government, such as Canada, Norway and Finland, but also El Salvador, Uruguay and Barbados. Many of the 42 countries that did not return any letters were in sub-Saharan Africa but the group also included Russia, Egypt and Cambodia.  La Porta’s team then examined the data to find correlations with factors such as the number of post offices and postal employees per capita, the use of postal code databases, and whether a country uses the Latin alphabet. These measures of resources and technology explained slightly less than half of the variation in countries’ postal performance. They then checked the return-to-sender results against measures of professionalism and meritocracy in a country’s civil service. La Porta and company also examined to what degree management skills may have had an effect, by comparing the data against measures of management quality in each country’s public and private sector. Both factors had a significant impact on the likelihood a letter would be returned to sender. The results suggest corruption and politics may not play as large a role in government inefficiency as some have argued, since the corruption-immune postal data is strongly correlated with standard measures of government efficiency, such as number of days to adjudicate a court case. “The overall story is that government is not that different from the private sector,” says La Porta. “The indication is that the postal service gets better with development not only because there are more resources but also because people learn how to better manage large organizations.” Public Policy, Research, 2013-05-10T17:01:29+00:00 http://www.tuck.dartmouth.edu/newsroom/articles/the-big-break-up http://www.tuck.dartmouth.edu/newsroom/articles/the-big-break-up For the past 30 years, we’ve taken it for granted that major companies have globalized their production and fragmented their supply networks to far-flung corners of the world in search of the best value. “Offshoring” has long been a subject to debate in conversations about economic growth and job protection, but here has been very little empirical research into why the phenomenon has occurred. Within academic circles, it’s often assumed that in addition to seeking out lower costs, companies have been driven to fragmentation by improvements in technology that have allowed them to communicate more effectively with suppliers overseas. However, there has been little evidence to support that assumption, says Teresa Fort, an assistant professor of business administration at Tuck. “There’s been a lot of theoretical work, a lot of models that people have written down, but it’s really hard to look at the plant level or firm level and see exactly who is doing it and what factors are driving them,” says Fort, who used to work as research assistant for the U.S. Census Bureau. Fort’s Census Bureau connections gained her access to an exclusive dataset showing the exact location of all U.S. manufacturing plants, along with their sales and employment. By tying those data to statistics on the level of imports by firms, it’s possible to assess how and why plants are sending out their production. Fort is presenting her findings in a new working paper that paints a rather surprising picture of offshoring. For starters, she finds that the number of plants engaged in sourcing customized materials from overseas suppliers is quite small. Nationwide, only two percent of plants are offshoring these inputs. However, that percentage changes dramatically when you consider the size of the company. Among firms, 27 percent of sales and 19 percent of employment occurs at companies with one or more plants that source the majority of their fragmented production from foreign locations. “Not a lot of plants are offshoring customized inputs, but those that do tend to belong to really big firms,” concludes Fort. Interestingly, it’s more common for plants to outsource their production to suppliers in other U.S. states. Compared to the two percent of plants sending work overseas, almost 30 percent of them are sourcing from other domestic plants. Here, too, there is variation. Plants in states with high wages, such as those in the Northeast and West Coast, are much more likely to send their work to lower-wage states such as those in the South.  In contrast, plants located in low-wage states that fragment production are more likely to send their work overseas, since they must look elsewhere to access lower labor costs. It’s a much more nuanced picture of outsourcing, and doesn’t fit so easily into political categories. “You can get both Obama and Romney to say we don’t want to ship jobs overseas. But the political economy ramifications are a lot more complicated when you talk about Boeing shipping jobs from Washington to South Carolina,” says Fort. “There will be a debate within the country about whether that’s a good thing or a bad thing.” Fort’s study also undermines the idea that advances in communication are driving jobs overseas. When she analyzed the data of plants engaged in high-tech forms of manufacturing, she found that while advanced technology can facilitate movement of production overseas, such movement is limited by the sophistication of the receiving country. “Companies are offshoring to countries with cheaper labor, but those countries also tend to have lower levels of technology—so higher tech firms need to source from higher tech locations.”  As a result, higher tech firms that offshore are more likely to source from more expensive countries such as Japan, but less likely to source from countries such as Bangladesh, which have less technology. Since wages in higher technology countries are often comparable to those in the U.S., increases in communication technology might actually aid in returning jobs to the U.S. At the same time, the greater worry—at least for some states—may be losing jobs to other lower wage states, where easier communications can decrease costs associated from coordinating production across locations, but highly skilled workers can also still take advantage of those technologies. “The differences between states in terms of worker skills is much smaller than the differences between countries,” says Fort. “South Carolina is going to be a lot more homogenous in terms of skills of workers compared to Bangladesh.” Given that distinction, offshoring may not be nearly the problem in the future that “onshoring” could be. Expect to see that issue coming soon to a political debate near you. Accounting, International Business, Research, 2013-05-10T15:23:41+00:00 http://www.tuck.dartmouth.edu/newsroom/articles/tuck-takes-on-tag-participation-challenge-through-may-31 http://www.tuck.dartmouth.edu/newsroom/articles/tuck-takes-on-tag-participation-challenge-through-may-31 This spring brings a compelling reason to renew your commitment to Tuck: the TAG Participation Challenge. {media1}A generous alumnus has offered $50,000 to TAG if 2,000 donors contribute by May 31. The person behind the challenge knows Tuck is a special place that creates the most loyal, engaged alumni in the world, and is leading the charge to continue that spirit of generosity and connectedness. “I am constantly impressed by the kindness and camaraderie of the Tuck community,” said Dean Paul Danos. “And what better way to inspire alumni and friends than a call to action that relies on the strength of our network. Tuck alumni love a good challenge, so I’m confident they will respond with their unparalleled enthusiasm.” Dean Danos never wagers against Tuck alumni in this arena, since more than 70 percent of them give to TAG every year. No other school—business or otherwise—even comes close to that level of giving. It’s something that arouses both pride and a bit of healthy competition, all for the benefit of an institution that turns out eminently capable and distinguished leaders in business and society. Rise to the May Challenge. Invest in Tuck and make a gift today. www.givetotuck.org. Tuck Today Alumni News, 2013-05-07T15:54:52+00:00 http://www.tuck.dartmouth.edu/newsroom/articles/student-group-focuses-on-business-environment-for-gays-and-lesbians http://www.tuck.dartmouth.edu/newsroom/articles/student-group-focuses-on-business-environment-for-gays-and-lesbians {media1}With the U.S. Supreme Court considering a challenge to the Defense of Marriage Act, which barred federal recognition of same-sex marriage, students at the Tuck School of Business recently hosted two national leaders of the gay rights movement to discuss the push for federal recognition. On May 1, Dan Solomon, national campaign director of the Freedom to Marry coalition, and Lt. Dan Choi, an infantry officer in Iraq who was dishonorably discharged by the military after coming out, spoke about changing public perceptions of gays and lesbians. The Dan Solomon event was organized by Jonathan Gantt T’13, a member of Tuck Pride, who offered some background on Tuck Pride. What is the history of Tuck Pride? Tuck Pride is a student-run organization with two objectives. First, Tuck Pride focuses on fostering a community for lesbian, gay, bisexual, and transgender (LGBT) students where they can share personal stories, build stronger networks, and socialize. Second, Tuck Pride does outreach to the broader community with the goal of engaging it through educational, social, and networking events. Tuck Pride’s membership includes out LGBT students and allies, totaling approximately 100 active members. What are Tuck Pride’s main initiatives? Tuck Pride hosts a variety of events. For members, it hosts an “Allypalooza” retreat in which the active LGBT and ally members go to a Dartmouth cabin for an evening to discuss the importance of ally advocacy in ending LGBT discrimination. Additionally, LGBT members go on a retreat in Boston or Montreal once a year in order to build stronger ties with each other. In order to engage with the broader community, Tuck Pride sponsors an annual Diva Party, which is a “party for a purpose.”  All proceeds from the party benefit a non-profit that works to prevent suicide among LGBT youth called the Trevor Project.  Tuck Pride also hosts educational events like the Marriage Equality News Hour in order to get the broader community involved in the LGBT movement.  Finally, Tuck Pride “lights up” Tuck Hall in the rainbow colors of equality and love on National Coming Out Day in October.  In conjunction with this special lighting, a large group of students gather to hear the personal coming out stories of their colleagues. In order to engage with the broader community, Tuck Pride sponsors an annual Diva Party, which is a “party for a purpose.” All proceeds from the party benefit a non-profit that works to prevent suicide among LGBT youth called the Trevor Project.  Tuck Pride also hosts educational events like the Marriage Equality News Hour in order to get the broader community involved in the LGBT movement.  Finally, Tuck Pride “lights up” Tuck Hall in the rainbow colors of equality and love on National Coming Out Day in October.  In conjunction with this special lighting, a large group of students gather to hear the personal coming out stories of their colleagues. What challenges do LGBT MBAs and business executives face? LGBT MBAs and business executives face significant challenges not only on their professional careers but also on their personal lives.  A married LGBT MBA who is recruiting faces a very different landscape than his or her married heterosexual colleagues.  While a Tuck LGBT graduate may be legally married in New Hampshire or Vermont, not only is the marriage not recognized by the federal government, but the graduate may find employment in a state that does not recognize same-sex marriages.  As such, the LGBT graduate literally has to choose between his or her career and maintaining equal protection under the law for his or her relationship. Additionally, in many states, the LGBT community is not a protected class and therefore LGBT individuals can be fired without cause simply because of their sexual orientation or gender identity.  Finally, from the locker rooms of professional sports to the offices of financial institutions, LGBT individuals are subject to discrimination and hostile work environments in the workplace.  On a more positive note, many companies in states where same-sex couples are not afforded the same rights and protections under the law have begun to offer personal tax offsets to compensate their LGBT employees the differences in the legal benefits benefitted by the government.  While these decisions are a step in the right direction, until LGBT individuals and their relationships are treated equally under the law, LGBT MBAs and business leaders will continue to face significant challenges as compared to their heterosexual peers. What was the significance of Marc Solomon and Dan Choi’s speeches on campus? Marc Solomon and Dan Choi’s visits to Tuck are especially timely given the need for continued support to end the institutionalized discrimination against LGBT individuals both in the United States and globally.  As the National Campaign Director for Freedom to Marry, Marc leads the effort to increase public support in the United States for the freedom to marry.  After visiting Tuck, Marc travelled to Rhode Island to be with Gov. Lincoln Chafee as he signed a law making Rhode Island the last state to legalize same-sex marriage in New England.  Dan Choi has been an outspoken advocate for ending discrimination against the LGBT community and was a leader in the effort to overturn “Don’t Ask, Don’t Tell” in the military. School News, 2013-05-07T15:37:43+00:00 http://www.tuck.dartmouth.edu/newsroom/articles/a-particle-theory-of-social-media http://www.tuck.dartmouth.edu/newsroom/articles/a-particle-theory-of-social-media {media1}Yaniv Dover has not one, but two Ph.D.s. One is in marketing. The other? Physics. To Dover, an assistant professor of business administration at Tuck, it’s a natural connection. The same mathematics used to model the behavior of atoms can be used to model human behavior. Dover first made the association during his time in the Israeli army. Some officers, he noticed, were better able to control their companies than others. He became obsessed with figuring out why. “There were a set of rules you had to maintain, and specific actions that had to be taken at the right times. If you did that, it worked like a charm,” he says. “I realized then that even though individual people are very complicated and unpredictable, some aspects of their behavior can be predicted.” During his graduate work at Hebrew University in Jerusalem, Dover found himself drawn to the types of marketing questions that could benefit from the complex mathematics of science: In the online world, how does information spread from person to person? What do those networks look like, what are their dynamics, and how can marketers tap into them to drive sales? Information today is certainly cheaper and freer flowing than ever before, and big companies no longer have a monopoly on it. Whether by email, online review, Tweet, or post, anyone and everyone is talking about companies and their products. “If you think of people as particles and you imagine that each interaction between them is a line, you end up with a web—the social networks of discussions,” says Dover. “I want to model it as an energetic structure.” In some structures, conversation flows well and participants want to return. In others, companies try to facilitate social interaction, but it’s a ghost town. Dover hopes to understand what geometrical structures lead to better group engagement. This will predict not only what groups will work, but let marketers connect people into groups and discussions that will be more lively and productive. He is also applying his techniques to study other aspects of the social network. For example, he recently published a paper on the authenticity of online reviews, finding that while fakery does exist, it represents only about six or seven percent of reviews, and tends to be more common among small or independent businesses than in corporate-owned chains. He is currently developing a model to predict sales based on social network data and, along with Albert Wesley Frey Professor of Marketing Scott Neslin, studying the influence of social media on brand loyalty. “Once we understand how social networks operate,” says Dover, “we’ll be better able to affect them.” Marketing, Tuck Today Feature, 2013-05-01T17:27:20+00:00 http://www.tuck.dartmouth.edu/newsroom/articles/patagonia-marketing-vp-answers-students-questions-about-corporate-responsib http://www.tuck.dartmouth.edu/newsroom/articles/patagonia-marketing-vp-answers-students-questions-about-corporate-responsib {media1}Forty-one years ago, Patagonia was a small business in Ventura, Ca. that was deeply inspired by wilderness, making steel pitons that climbers used to ascend sheer rock faces. But when climbing routes were being damaged by climbers repeatedly hammering their pitons into the rock, Patagonia (then called Chouinard Equipment) found an alternate product—the wedge chock—that offered the same protection as pitons without the negative environmental effects. It published a persuasive essay on the chocks in its fall 1972 catalog, and pitons rapidly receded into history. Today Patagonia has annual sales of $500 million, but its mission statement still reflects the practicality and ideology of its early years: to “build the best product, cause no unnecessary harm, and use business to inspire and implement solutions to the environmental crisis.” How Patagonia has been able to grow yet maintain its values was the topic addressed by Vincent Stanley, the company’s acting vice president of marketing, in a talk entitled “Patagonia’s First 40 Years: Achieving Profits Responsibly.” A nephew of Patagonia founder Yvon Chouinard, Stanley has been with the company since 1973. He visited Tuck at the invitation of the Center for Business & Society and, after his talk, had lunch with a select group of Tuck students. The piton issue showed Patagonia that its business could be successful and have a positive effect on the environment. The lesson came up again in 1988 in Boston, where the company opened its third retail store. Immediately after the store opened, employees began calling in sick with severe headaches. It turned out that they were inhaling toxic chemicals that were off-gassing from the new cotton clothing stored in the basement. The chemicals had been applied to the cotton as pesticides and, later on, to prevent mildew in shipping. Realizing that the conventional cotton industry was harming the environment as well as Patagonia’s employees, the company decided to shift to organic cotton, taking a mere 18 months to alter the supply chain for 66 products. “We had to pray for rain, guarantee the loans of cotton farmers, and learn all the processes of clothes making,” Stanley explained. “It really taught us how to talk to suppliers and negotiate.” In 2005, Patagonia focused on the other end of the product lifecycle, initiating the Common Threads clothing recycling program. First it started taking back used Capilene underwear, which it would send to Japan to be melted down, re-extruded and turned into new underwear. Then it added fleece to the list, and in 2010 the company announced it would accept any of its clothes to be recycled. This “cradle-to-cradle” sensibility came out of the belief that it wasn’t sufficient to make better products that were less harmful to the environment; “we also had to question what we make and not buy what we don’t need,” Stanley said. Patagonia took a more public step in that direction in 2011 when it bought a full page advertisement in the New York Times for its R2 fleece jacket. Departing sharply from the typical marketing message, the advertisement declared “Don’t Buy This Jacket,” and then explained the ecological footprint of the product and urged customers to not “buy what you don’t need” and “think twice before you buy anything.” It was a bold way to both tout its own high-quality, long-lasting products, and discourage the kind of rampant consumerism that is hurting the planet. It’s unlikely such a strategy could come out of a public corporation, and the Chouinards know it. They could have sold the company years ago, but they “wanted to use the business as a pulpit and laboratory,” Stanley said. Toward those ends, Stanley and Chouinard co-authored “The Responsible Company,” a book that attempts to show other businesses how they can become more sustainable. Patagonia also worked with Walmart to create an index of social responsibility for the apparel industry. Called the “Higg Index 1.0,” the indicator-based tool helps companies evaluate their product inputs and facilities to gauge sustainability and make improvements. The index is an effort by the Sustainable Apparel Coalition, which has 82 members and includes names such as Nike, Levi’s and H&M. Patagonia is still small compared to the Walmarts and Nikes it is trying to influence, but its successes over the years have given the company confidence to effect change on a larger scale. Stanley is optimistic about corporate sustainability, especially because most MBA graduates today have had some exposure to it during business school. Tuck is no exception. With its Center for Business & Society and courses such as Business and Climate Change, Tuck students have many opportunities to learn how businesses can make the economy more sustainable. Corporate Citizenship, School News, 2013-05-01T17:08:41+00:00 http://www.tuck.dartmouth.edu/newsroom/articles/brand-champion http://www.tuck.dartmouth.edu/newsroom/articles/brand-champion Kevin Lane Keller likes to joke about his “so-called spare time.” After having chaired Tuck’s marketing group, Keller, the E.B. Osborn Professor of Marketing, was recently appointed to a two-year term as the executive director of the Marketing Science Institute, a 34-year-old nonprofit in Cambridge, Mass., that encourages cross-pollination between academia and industry. Keller is the co-author of the most successful MBA marketing textbook of all time, Marketing Management, with Philip Kotler, and his own bestselling MBA textbook, Strategic Brand Management. He continues to update both on an almost-continuous basis. When he’s not teaching, researching, writing, consulting, lecturing, parenting his two daughters (with wife and fellow Tuck marketing professor Punam Anand Keller), he helps manage Australian rock legends, The Church. How did you get into marketing? When I headed to business school, I fully expected to focus on finance, but once I took my first marketing course, I was hooked. I love that there’s a human side to understanding consumers—why people buy what they do. You’re trying to make people happy. I also love the competitive side, looking at how firms compete to win people’s loyalty and preferences. I like the social side in terms of all the public good that we can achieve for non-profits and public policy. Whether it’s advertising or pricing, or how you distribute products, I see marketing as the heart of business. And it changes constantly. What is it about Tuck’s marketing group that makes it so strong? Tuck is a smaller business school; there are just eight of us in the marketing group. But pound for pound, we match any program. Collectively, our research has rigor and relevance. It has gone through the scrutiny of being published in the top academic journals. We focus on practical, relevant problems that managers or policy makers are thinking about. We’ve had an important impact on industry, but we also do strong work on public policy and social marketing. We take important, tough, messy problems and collaborate on research that actually provides insight and illuminates answers. And it’s also no small thing that our faculty is a genuinely nice group of people. I believe one of the reasons they’ve been so successful is that they’re easy to get along with. They don’t have big egos. Myself, Scott Neslin, Kusum Ailawadi, Punam Anand Keller, Praveen Kopalle—we’ve stayed together as a group for 15 years. We collaborate on research together and we honestly like each other. More recently we’ve brought in some really good new and established people too—Yaniv Dover, Ellie Kyung, and Peter Golder. They’re all outstanding. Whether it’s MBA courses or executive education, we have very popular courses with great teaching. Many of our faculty have written the textbooks that impact education at Tuck, and at other schools too. We have a really impressive set of elective courses that I think are some of the best around on those topics. Scott’s database marketing course—he’s one of the world’s experts on that topic. You couldn’t find a better person to teach that. Praveen’s pricing course is another example. Many schools don’t even have a pricing course, and ours is well designed and very popular. Kusum’s channel course, Peter’s international course, and Punam’s social marketing class all benefit from their unique experiences and insights. It’s a blockbuster lineup. How do you and your colleagues interact with practitioners and what value does that have for Tuck? There are many ways that we work with companies, as consultants and as researchers. One typically leads to the other. For example, we’ll work with a company and find out that it’s got a big database of information. The company invites us to study it because it will help their marketing team understand the decisions they’ve made. When we’re working with industry, it’s not consulting for consulting’s sake. It has implications for research and teaching. It keeps us on the cutting edge, making sure we know exactly what’s going on in industry and helping to shape some of the things and what actions are being taken. It comes back into the classroom through case studies. I’ve consulted or worked with Starbucks, Intel, Nivea, Got Milk?, and Red Bull, and just about every top marketing company. That exposure helps me write case studies and also gives me a lot of insight I can share when those companies come up. For example, I’ve been in contact with Nike on and off for 20 years. I know an awful lot about the brand, including things most people don’t know—and mostly good things. Even though everyone knows about Nike, my experiences enable me to share behind-the-scenes information that helps students better understand why the brand has been successful and under what circumstances it was not. What’s in it for companies who want to engage with academia? Companies are always trying to stay up to speed and compete in their markets. Often companies are so close to the issues that they can’t see things, or they get in the habit of thinking a certain way. Outside input is extremely helpful. There are times I work with companies when I think, “Gosh, these are smart people and this seems so obvious. Why haven’t they figured this out?” What academics and MBA students can do for companies is help them structure problems and come up with solutions. In any real world situation, there’s so much going on and it can be an almost overwhelming amount of detail. The value of an MBA education is the ability to structure and solve business problems in a rigorous way so that companies are not just shooting from the hip ad hoc. Has the field of marketing changed? Oh, it’s hugely different from when got my MBA in 1980, and even over the 15 years I’ve been at Tuck. The change is profound and accelerating. There are concepts that are enduring and timeless, like positioning, targeting, and segmentation. But it’s amazing how much has changed about channels, communication, pricing, and other marketing tactics. I’m guessing a lot of that has to do with technology? Definitely. Technology is pervasive. People in marketing tend to hone in on social marketing and how the consumer is in control, but technology is empowering companies as much as it’s empowering consumers. They forget that consumers don’t always want to be in control. They have jobs and busy lives. If you think of all the brands you’re going to touch in a given day, you can’t be bothered going to a blog to evaluate your every toothpaste and soap purchase. And even if they want to, not everyone has the skills and knowhow to do that. Tech is clearly empowering consumers, but empowered is not the same as enlightened or motivated. What are some other trends you’re watching? Social responsibility is a powerful force in marketing. I’m especially interested in finding win-win solutions where a company is aiding a cause—environmental, health, social, or community—but at the same time strengthening their brand. Corporate philanthropy is great, but companies may not do as much if they don’t see the payback to their brands. Procter & Gamble is a good example. I worked with them for a long time and I’d push them hard on cause marketing. I think they’ve really raised their game in the last five years. They got really involved with the Olympics and produced some great tearjerker ads about thanking mom. And they also donate a lot of money to the Special Olympics, a great organization. Everyone wants to build relationships with customers and cause marketing allows you to do it in emotional and personal ways. Globalization is another big one. There are so many new markets you can sell to, particularly developing markets like India and China, but also multicultural markets within the United States. A multicultural mindset is a good one to adopt, whether you’re global or not, because cultural differences exist even here at home. Tell me about your current research.
 One thing I’m working on, along with Peter Golder, is how brand knowledge gets developed among college students in China and how loyalties form and change over time. This is a time in life when a lot of preferences get formed, so marketers are keen to understand it. I have another study looking at brand extensions. Trying to understand how expandable brands are and the best way to sequence a series of brand extensions. For example, if you’re an athletic apparel company and you’re thinking about getting into exercise shorts, running shoes, and healthy cereals, which should you introduce first? We’re in the middle of the study now, but we’re finding that in some cases, a company might be better off making a stretch extension first—like the cereal. If you’ve established yourself firmly as apparel only and then you make a big jump, you’ve violated a consumer’s expectation of who you are and overall impressions are negative. However, if your brand is less established and they have a broader picture of who you are, you can ultimately go further. In your years of studying consumer behavior, have you come to any insights about how to better understand people? I’ve always tried to be very empathetic. It’s vital for marketers to try to adopt a customer mindset. And to be honest, that’s hard for professional marketers, let alone MBA students. We do an exercise in my Strategic Brand Management course called the Average American Consumer Quiz. I have a set of questions from a nationally representative sample of 2,000-plus Americans. It presents a series of statements like, “I like to hunt or fish” and “A woman’s place is in the home” and “I like to pay cash for everything I buy.” I then ask the students to estimate how many American consumers would agree with each statement, by gender. Then I show them what the real answers are. They always learn two things: First, they are way off. And second, they exaggerate gender differences. Wikipedia says you help manage the rock band The Church? Really? I’ve loved rock and roll forever. I remember the summer of ‘67 really well—I was 11 years old – so many great bands and songs. I’ve worked with The Church for 15 years and been the executive producer on their records. It’s been a neat way to give back to a band that I loved, and one that needed help in various ways with management and marketing. As famous as they already were when I met them, the business is so tough. They said if I hadn’t come around, they wouldn’t be putting out records today, and wouldn’t have made the Australian Rock and Roll Hall of Fame, which they did last year. I’ve learned a lot about the music business and enjoyed every minute of it. Marketing, Tuck Today Feature, 2013-05-01T14:12:17+00:00