Thursday, July 6, 2017
Wisniewski, Yekini, and Omar on “Psychopathic Traits of Corporate Leadership as Predictors of Future Stock Returns”
Tomasz Piotr Wisniewski, Liafisu Sina Yekini, and Ayman M. A. Omar posted “Psychopathic Traits of Corporate Leadership as Predictors of Future Stock Returns” on SSRN on June 13, 2017. You can find their abstract here.
I was particularly interested in how the authors measured psychopathy. Here is a relevant excerpt:
Using UK data, we construct a number of corporate psychopathy indicators and link them to the returns that ensue over the next 250 trading days - a period roughly equivalent to one calendar year.
Even if clear guidance exists on how to diagnose psychopathic personality disorder in humans (Hare 1991, 2003), the practical difficulty is that executives will be generally unwilling to participate in time consuming surveys, particularly those that are likely to expose the dark side of their character. We choose to follow a more pragmatic approach and, similarly to Chatterjee and Hambrick (2007), collect information in an unobtrusive way by going through company-related archives and data. Firstly, using automated content analysis we assess to what extent the language in annual report narratives is symptomatic of psychopathy. This is done by counting the frequency of words that are aggressive, characteristic of speakers who are self-absorbed and who have the tendency to assign blame to others. Secondly, we look at likely correlates of managerial integrity. More specifically, we try to identify companies whose auditors have expressed reservations in the Emphasis of Matter section of the annual report and those that have experienced a publicized Financial Reporting Council (FRC) intervention. Thirdly, we consider a measure that derives from the observation that psychopaths require stronger external stimuli to experience emotions and, therefore, have the tendency to take high risks. We assume that excessive exposure in a corporation will result in a high degree of idiosyncratic risk. This type of risk, which is entirely company-specific and unrelated to the broader economy, is measured in our empirical inquiry. Lastly, we construct a variable to capture the reluctance of a company to donate to charitable causes.
Our empirical investigation documents a negative association between the presence of managerial psychopathic traits and future return on common equity.
Friday, June 30, 2017
While I am already looking forward to returning to the classroom in the fall, one of the reasons that I love summers is that I get to catch up on reading. It has been an embarrassingly long time since I have finished a fiction book, but I am committed to making fiction an increasing percentage of my reading.
Percy's Moviegoer won the 1962 National Book Award. I have my brother Will to thank for the recommendation and for the book itself. The novel focuses on the life of a New Orleans area stockbroker "Binx" Bolling, and his search for meaning. I won't ruin the story for those who have not read it, but I was moved by the Binx's struggle against what he called the malaise and everydayness. Binx appears to be a pretty sad character, spending a good bit of time hiding from life in movie theaters and engaging in flings with his secretaries, but he can also inspire the reader to ask serious questions, engage in meaningful relationships, and live more intentionally.
Friday, June 23, 2017
Brooks paid each participant $100 for 90 minutes.
The group was well-facilitated, and the group members stayed incredibly engaged. The 90-minutes flew by.
The research Brooks was conducting on both shoe design and marketing was extremely qualitative. It was essentially a brainstorming session. I do think Brooks could have gotten more out of the time if they would have had everyone privately write down their own ideas first, as there were about three or four of the ten of us who dominated the discussion.
While this type of focus group was not cheap---$1000 in payment plus renting the room plus travel for two employees from Seattle---it was surely a very small fraction of their production and marketing budget. And I do think Brooks got some valuable ideas. Brooks does this sort of thing all over the country, and their employees said that they do start to hear patterns in the responses. It is those patterns that Brooks acts on, as they can't possibly address every one-off comment.
This focus group made me think that universities should consider similar focus groups with applicants and with local companies. I know a bit of this happens informally at most places, and perhaps it happens formally at some places, but I do wonder if it is done with the same regularity and intensity as for-profit firms like Brooks. I think the insights would be valuable, and even if the insights are poor, the organizing institution does get to explain itself (and show it really cares) to the focus group participants.
Monday, September 12, 2016
Interesting research has been done on overconfidence in business leadership (see, e.g., here, here, and here) and political behavior (see, e.g., here and here). I periodically consult the literature in this area for use in my work. It is fascinating and often helpful.
In my continuing career development advice to law students, and as a member of our faculty appointments committee at UT Law this year, however, I recently have come to notice and be concerned about overconfidence in job searches. Specifically, I see law students who, in testing out a new confidence in their knowledge and skills, overdo it a bit and over-claim or come across as unduly self-important. I also see faculty candidates who have registered for the Association of American Law Schools Faculty Appointments Register (FAR) puff and oversell--using the comment areas to make cringe-worthy self-aggrandizing statements about their teaching or scholarly background or abilities.
Most of us prefer to associate with confident people. Confidence in a leader or colleague is an attractive trait--one that we associate with strong governance and high levels of performance. Confidence wins appointments, elections, and jobs. Yet overconfidence, if recognized, is unattractive and often means lost opportunities.
Overconfidence is common. Don Moore, a faculty member at Berkeley's Haas School of Business, notes this in a recent blog post on Overconfidence in Politics.
I study overconfidence among all sorts of people, from business leaders and politicians to college students and office workers. And my research shows that most people are vulnerable to overconfidence. We are excessively confident that we know the truth and have correctly seen the right path forward to prosperity, economic growth and moral standing. Research results consistently show that people express far more faith in the quality of their judgment than it actually warrants. . . .
How do those of us who advise law students enable them to be confident and show confidence without becoming overconfident--or projecting overconfidence? In his post on résumés and interviews two years ago, co-blogger Haskell Murray advised students to avoid overstating their accomplishments.
Lawyers, perhaps more than other professionals, will call you out on any overstated items on your resume. While I have met plenty of arrogant lawyers, and perhaps was one, arrogance isn’t going to win you many supporters in the interview. Avoid vague self-congratulations (e.g., “provided excellent customer service.”). Stick to the specific, verifiable facts (e.g., “voted employee of the month in April 2012” or “responsible for a 35% increase in revenue from my clients.”).
I totally agree. I also made a related point regarding the written word in my post on cover letters back in January.
. . . I see a significant number of cover letters that use strident adjectives and adverbs to help make their points. The sentences in these letters tend to smack of over-claiming. Also, in many cases, these adjectives and adverbs represent poor substitutes for well-chosen . . . stories. Most employers are likely to be more favorably disposed to the documentation of specific facts substantiating an applicant's suitability for an open position than they would be to sentences consisting of self-selected (and sometimes over-blown) characterizations of the applicant's suitability for that position.
But I have learned that the line between confidence and overconfidence, as important as it is in the job search process, can be a thin one. And decisions about how to confidently--but not overconfidently--communicate with contacts, mentors, and prospective employers (among others) often must be made on one's own and quickly. So, my bottom line advice to students is to focus generally in all communications, oral and written, on being other-regarding. This article written by a Forbes Contributor makes some great observations and offers tips along those lines. And if you can ask a trusted mentor to help you prepare for common questions or review the text of emails or letters, that's great.
What else? You tell me. I am not confident that I know more . . . . :>)
Monday, August 15, 2016
As many of you know, I often like to post on issues relating to advising students (witness my cover letter posts, the most recent of which can be found here). I also like to post from time to time on issues relating to fashion and the law (e.g., this post). And sometimes, I fuse the two in a single post. This post is one of those fusion posts.
Many of us intuitively understand that clothing affects not only the perceptions others have of us but also the perceptions we have of ourselves. Some of us may even have done research to unearth evidence that these intuitions have some empirical traction. But can what you wear affect your performance? Research provides some evidence that it can.
Researchers at Northwestern University have identified a "systematic influence that clothes have on the wearer's psychological processes" that they term "unclothed cognition." Their research, published in the Journal of Experimental Social Psychology in 2012, found that the attentiveness of the subjects was higher when wearing a lab coat than it was when they were not wearing a lab coat or were wearing a lab coat described as a painter's coat. The research was fairly widely reported at the time. Although the study explored the effects of wearing a lab coat, one can see how the results may also hold for people wearing other performance-linked clothing, like athletic wear or other professional clothing, including business suits. (A subsequent study on the cognitive effects of business suits can be found here. More general commentary is available here and elsewhere.)
Admittedly, the results of these studies and others like them are qualified and the research in this field is at an early stage. Having said that, as our students start interviewing for jobs and engaging in clinical practice and other experiential learning in the new semester, the possible effect of clothing on performance may be a relevant footnote for them. I admit that I am not a fan of dress codes, as a general rule. However, I may mention these studies to my students so that they can use the information in their decision-making, if they so choose.
Friday, June 10, 2016
I have been following Professor Angela Duckworth's work on grit for well over a year, so I was eager to read her new book, Grit: The Power of Passion and Perseverance. In fact, I can't remember the last time I bought and read a book within a few weeks of it being published.
The book is an easy read, written for a for a popular audience, and I was able to finish it in three relatively short sittings.
Below, I reflect on the book, hopefully in a balanced way.
Thesis. As may be evident from previous posts of mine, I like Duckworth's thesis - essentially, that passion and perseverance in pursuit of long-term goals are important in achieving success. Duckworth is careful to caveat her thesis, noting at hard work and passion are important, but are not the only factors that matter in achieving success. With this caveat, her thesis seems rather obvious and uninteresting.
Grit Scale. The Grit Scale Duckworth created for her studies seems easy to fake, and to her credit, she admits that it can be faked, like most self-reporting measures. Given the ability to fake the Grit Scale, I am not sure that it would be of much use in practical settings where the stakes are high (such as admissions or hiring). In one of the more interesting studies, Duckworth discusses how they gave the Grit Scale to West Point cadets before going through Beast Barracks (described as the toughest part of the four years). Supposedly, Grit scores did a nice job predicting who would stay and who would drop out. Given that the scale is easy to fake, maybe the interesting finding is not "those who actually have more grit perform better" but rather "those who think they have more grit (or are willing to lie that they have more grit) perform better.
Parenting and Teaching. As a parent, I appreciated her chapter on parenting for Grit (though she admits that these are just her thoughts, and unlike other parts of the book, the parenting chapter is lacking directly applicable scientific studies). In particular, she notes the importance of being both supportive and demanding. This is also fairly obvious, but easy to forget, hard to consistently apply, and important to remember. This instruction applies to teachers as well -- make clear that you have high expectations, but also communicate you are there to help and believe the students can meet the expectations with work. For a skeptics view, at least on the point of whether grit can be taught, see here.
Creativity, Talent, Structural Barriers: While Duckworth admits that there are other factors that contribute to success, I didn't think she made a strong case for grit being more important than creativity or talent. In fact, most of the gritty people she mentioned had certain natural advantages over many others. While grit may be needed to get things done, it seems like creativity and talent and access are all necessary and may be even more important than grit in some cases.
Anecdotes. There are a number of anecdotes in the book. The stories are less convincing than the academic studies, but the stories help illustrate her points. I especially liked the sports stories, including the ones about the UNC women's soccer team and the Seattle Seahawks. The coach of the UNC soccer team, for example, had his team memorize passages related to each team core value, and then also integrated the values into practices and games. Much better than a meaningless organization vision statement.
All in all, I think the book was worth reading, if only to stay current on some of the theories that are likely to be talked about by educators at all levels, and to inspire more passion and perseverance in general.
For a fair and thoughtful critique of Grit see here.
Friday, June 3, 2016
Next week, I will post some reflections on the contents of the book, but for now, I would like to discuss professors publishing for a popular audience. Tongue-twisting alliteration unintended.
I am thankful that Duckworth wrote this book for a popular audience rather than in a way that would target a narrow slice of academia. Even as a professor myself, I find books written for popular audience easier to digest, especially if in a different discipline. While popular press books often oversimplify, I would rather a professor author a popular press book on her studies (and studies in her field) than have a journalist attempt to explain them. Also, while a popular press book may oversimplify, professors tend to be intentional about avoiding claims that are too sweeping. Note that in this interview, like the book, Duckworth is careful to state that grit is not the only thing that contributes to success. Finally, especially when the professor has done the background academic work first, as Duckworth did in many peer-reviewed journal articles, a popular press book can reach more people and inspire change and may eventually lead to broader engagement with the underlying academic articles.
Grit, as a popular press book, has already reached a large audience. Grit was published by Scribner: An Imprint of Simon & Schuster (not a university press) and jumped into the top-5 of The New York Times best-seller list for hardcover non-fiction. Duckworth had already reached well over a million people with her TED talk, and the book allowed her to be much more nuanced than she could be in a 6 minute speech. The TED talk was a gateway to her popular press book and perhaps her popular press book with be a gateway to the academic research she cites.
One problem with engaging a large, popular audience is that the professor may lose control of her message, and people may misinterpret the findings. Duckworth looks like she is staying engaged in the conversation, however, and has, for example, written to argue against grading schools on grit.
In short, there are certainly potential problems when writing about academic topics for a popular audience, but I am glad Duckworth took on the challenge and spread her research in this way. That said, as I will discuss next week, Grit does have weaknesses, in addition to its strengths.
Friday, January 8, 2016
In short, temptation bundling is putting something you want to do together with something you should do.
Temptation bundling can make both activities more enjoyable --- you feel better about the want activity because you also accomplished a should activity, and the should activity is less difficult because it is married with a want activity. For example, temptation bundling is what I have been doing with podcast listening; I only listen to podcasts (want) when I workout (should).
Below are a few temptation bundles that might work for professors:
- Drinking caffeinated drinks only while researching;
- Listening to your favorite music only while grading; and
- Eating chocolate only when in faculty meetings.
Friday, January 1, 2016
Happy New Year!
Last year I wrote a bit about New Year's resolutions.
As some of you know, I wasn't able to go the full year without checking my e-mail on Saturdays. In fact, that resolution was toast a few weeks into 2015.
One of the problems, I think, was that I had 20 resolutions in 2015. We all have limited self-control, and we can experience overload in January.
I have been doing New Year's resolutions for as long as I can remember, with varied amounts of success, but I am going to try something a bit different this year.
The Cass Sunstein article I included last year gave me the idea. In the article, he states "But how can we ensure that our resolutions actually stick? Behavioral economists have three answers: Make them easy and automatic, make them a matter of habit, and make them fun. A resolution is more likely to work if it is concrete and can be translated into a simple routine."
This year, instead of a long list of resolutions, I plan to focus on forming one habit each month. I hope the habits will continue after that month, but after one month of intense focus, hopefully the habit will have moved into the less laborious System 1.
Interested to see how this works. It may be a more sustainable solution. If you form the right habits, then it is less likely that you will have to continue setting the same goals (like "lose weight" and "save more") each year. For example, my saving-related resolutions are always the simplest to keep because I just change my direct deposit rules and let it run its course. Direct deposit acts a bit like an already formed habit - easy and automatic. Of course, many habits are quite difficult to form, but I think focusing on one a month sounds doable. Whether I can keep all 12 going in December 2016 (and beyond) remains to be seen.
Good luck to all those making resolutions!