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EPISODE 1

The Strangely Immovable Economics Of Live Performance

A conversation with Dean Peter Rodriguez on his research into what live performance reveals about our economic future.

EPISODE 2

The Surprising Science Of Scandal

Professor Anastasiya Zavyalova, a scholar of scandals, reveals startling truths about public-facing scandals, from NCAA to the Catholic Church.

EPISODE 3

Inside The Magic Of Work Epiphanies

A conversation with former Professor Erik Dane about epiphanies at work and in life: how they happen and what they tell us about the nature of problem-solving.

EPISODE 4

Live Long And Prosper– What America’s Newcomers Know About Living Longer & Saving Money

Rice Business Wisdom Editor Claudia Kolker explores some surprising ways Americans can benefit from the skills and habits of people new to the U.S.

EPISODE 5

Unmarketing: A Guide To Not Buying Anything

A conversation with Professor Utpal Dholakia, a marketing expert who encourages people to buy and consume prudently to maximize pleasure.

EPISODE 6

The Cantankerous Community Meal

A discussion featuring Professor Doug Schuler examining the challenges in social sector collaborations to address food insecurity.

EPISODE 7

Is Texas Still Full Of Wildcatters?

A discussion featuring Gaby Rowe, Marc Nathan and Lawson Gow exploring the question of whether and how Texas stacks up for starting businesses, taking big risks, and forging new industries. Session will touch on Houston as an innovation hub.

TRAILERS

Get a sneak peek of The Index with this trailer.

Based on research Utpal Dholakia, Leona Tam, Sunyee Yoon and Nancy Wang

• Most Americans don’t save enough money for their goals.
• Researchers can now predict who will be successful or unsuccessful at accumulating long-term savings.
• Successful savers incorporate regular incremental savings techniques into their daily routines, as if they are going to the gym.

Saving enough money is key to a comfortable, stress-free life. Yet much as we want a good education for our children or leisurely golden years for ourselves, most Americans don’t save enough for either. The average savings rate in the United States has been less than five percent, and a majority of Americans report trouble saving on a regular basis. Oddly, neither income nor financial knowledge have much to do with better savings habits. Yet some people are good savers and others are not.

What accounts for the difference?

Utpal Dholakia, a professor at Rice Business, along with his co-authors Leona Tam, Sunyee Yoon and Nancy Wong, think they’ve found the answer. In a series of recent studies, they isolated one measurable behavioral trait that accurately predicted an individual’s propensity to save money.

This trait, which they dubbed one's Personal Savings Orientation (PSO), is an individual’s ability to embed a range of savings behaviors — some automatic and routine, some intentional — into daily life. Among these habits: routinely placing a chunk of each paycheck into a savings account, or making frugal choices in petty day-to-day expenditures.

Subjects who scored high on the team’s assessment scale wove more of these behaviors into their daily routines and accumulated sizable savings over time. Subjects who scored low, even if they were financially literate, did not.

Crucial to accurately gauging an individual's PSO was a sound assessment tool. To make sure their measure was robust, the researchers conducted seven experiments to test its efficacy. Then they conducted two more experiments: the first to identify the precise role that PSO plays in translating financial knowledge into accumulated savings, and the second to test if it was possible to help people with low PSO scores raise them.

Various studies have analyzed savings behavior. However, most focus on efforts to achieve specific goals, such as paying for a wedding or funding college. This study was different: It treated savings behavior not as a one-off project, but as an ongoing state of mind that guides an individual's actions consistently over time. In fact, Dholakia and his colleagues likened it to maintaining a healthy lifestyle, much like going to the gym.

It’s an apt analogy. The ability to save, the team found, resembles a muscle that needs constant exercise. The PSO indicator indicates individuals who have this muscle, and work it out with regular, incremental savings behaviors as part of their daily routines. Significantly, this measured approach to saving worked better to produce long-term savings than just saving for targeted objectives. Meanwhile, contrary to popular belief, financial literacy alone had little impact on savings results, especially for the subjects with low PSO scores.

But those with low PSO scores shouldn’t despair. Specific interventions, the researchers found, can beef up the savings muscle. Most important: taking steps to build regular incremental saving practices. Exercised regularly, these routines will produce positive results — even for low PSO types. Saving behaviors, in other words, can be built into habit.

When it comes to savings, it's a marathon, not a sprint. Build up those muscles, Dholakia's team proposes, and jog, slowly but steadily, every day.

Utpal Dholakia is a professor of marketing at Jones Graduate School of Business at Rice University.

To learn more, please see: Dholakia, U., Tam, L., Yoon, S., & Wong, N. (2016). The ant and the grasshopper: Understanding personal saving orientation of consumers. Journal of Consumer Research, 43(1), 134-155.

Based on research Gustavo Grullon, James P. Weston, Jason Fink and Kristin E. Fink

• A higher proportion of younger firms and a dramatic increase in firm listings caused wild fluctuations in stock prices during the Internet boom.
• This might not have represented a decrease in market quality.
• Lower investment costs for young firms could represent an efficient mechanism for capital allocation, risk sharing and social welfare.

The 1990s were exciting years for people investing in stocks. Geeks and innovators in West Coast dorm rooms and garages constantly introduced new technology to the market. East Coast traders, investors and soon everyone plugged into finance took note, as the Internet became a household commodity.

While the high-tech industry boomed, the stock market saw a huge spike in volatility. But most researchers now agree that the spike was not caused by inflated market prices. Rather, firm-specific risk, or idiosyncratic volatility, increased. In other words, a vast number of companies, introducing a range of products and services while promising future growth and returns, simply made for less certain investments.

But what, specifically, drove this market-wide fluctuation during the boom remains open to debate. Gustavo Grullon and James P. Weston, professors at Rice Business, and a team of collaborators examined this issue.

Some researchers have linked the greater volatility to changes in fundamental characteristics of public firms, such as a firm’s size or a high rate of capital expenditures relative to tangible assets.

The researchers found that systemic changes in firm fundamentals indeed contributed to one of the largest spikes in idiosyncratic volatility in U.S. history. At the same time, they argue, these changes do not speak to a longer-term trend.

Other researchers have argued that firm-specific risk rose due to the irrational behavior of traders changing “sentiment.” Testing for sentiment as a driver, Grullon, Weston and their collaborators found that investor sentiment incontestably correlated with idiosyncratic volatility.

When compared to a firm’s age, however, investor sentiment either lost its statistical significance or related negatively to idiosyncratic risk. After considering a range of alternative arguments in their analysis, the researchers weren’t completely satisfied. Perhaps, they speculated, the spike in idiosyncratic volatility was due to a market-wide decline in firm maturity and the large increase in initial public offerings. After all, the ratio of equity market capitalization represented by young firms peaked in the late 1990s. And a large number of young firms dependent on future cash flow can influence idiosyncratic risk across markets.

By evaluating over 94 percent of the total market capitalization in the United States between the years 1926 and 2006, Grullon and Weston tested idiosyncratic risk. Controlling for characteristics related to a firm’s age, they found little evidence of an abnormal spike in idiosyncratic volatility during the Internet boom.

Instead, they found, firm characteristics such as age, as well as fundamentals such as size, profit margins and tangible assets, gave way to greater uncertainty about future profitability. It was this dynamic, the researchers concluded, that drove the rise in market-wide idiosyncratic risk. And it might not have been a bad thing.

In general, American capital markets have shown an increasing willingness to buy firm equity claims at earlier stages in an enterprise’s life cycle. If a shift in supply results in a higher proportion of younger firms, this might represent a decline in the cost of equity capital for young firms. Lower costs for investing in young firms could represent an efficient mechanism for capital allocation, risk sharing and social welfare.

Gustavo Grullon is a Jesse H. Jones Professor of Finance

James P. Weston is the Harmon Whittington Professor of finance at Jones Graduate School of Business at Rice University

To learn more, please see: Fink, J., Fink, K. E., Grullon, G., & Weston, J. P. (2010). What drove the increase in idiosyncratic volatility during the Internet boom? Journal of Financial and Quantitative Analysis, 45(5), 1253-1278.

Based on research Andrea Mattozzi and Antonio Merlo (former professor and Dean at Rice University)

• The public tends to think elected politicians don’t represent the best and brightest of all possible candidates.
• Political parties often select mediocre candidates because of dueling forces known as the discouragement and competition effects.
• Majoritarian electoral systems may encourage parties to nominate more competent candidates.

Politics has been called “show business for ugly people.” It may also be the natural calling of the mediocre and the indifferently prepared, as democracies often find themselves being run by people with less than stellar educations or with little valuable experience. Italy, for example, has a significant number of legislators who don’t even boast a high school degree, while former U.K. Prime Minister John Major was an insurance clerk before beginning his political career. Such examples are plentiful.

Comparing degrees may not accurately capture candidates’ merits. But it is one source of widespread suspicions that elected officials are not quite the cream of the crop. Politicians, critics in many countries complain, are instead members of a “mediocracy.” The truth hurts. Research shows that political parties tend to recruit electoral candidates of average ability rather than their higher-caliber peers, measured by signifiers such as educational attainment.

According to a study co-authored by Antonio Merlo, former chair of the economics department at Rice University, and Andrea Mattozzi of the European University Institute, two phenomena — a mediocre pool of candidates and mediocre elected officials — may reinforce each other.

Research shows that political parties choose less-qualified candidates in order to spark widespread involvement in party politics. They’re trying to avoid what the authors call the “discouragement effect”: when highly qualified members of a competitive organization discourage less competent members from contributing. By seeking a fairly homogeneous group of average politicians, political parties encourage healthy competition within the organization, strengthening the group’s participation and collective political force.

But the discouragement effect doesn’t act alone. It’s part of a trade-off with another dynamic called the “competition effect,” in which recruiting the best-qualified candidates boosts a party’s chances of winning an election. When political parties believe more in the competition effect, they recruit the best candidates. When they worry more about the discouragement effect, they choose candidates who are mediocre.

To show these two effects in the candidate-selection process, the authors designed a theoretical model that mimicked the candidate selection and election process. In the model, two parties selected electoral candidates based on observed effort, distributed across a broad spectrum. The candidate that exerted the most political effort in the general election emerged as the winner. Political ability for each candidate was measured by the cost in effort associated with political activity. In other words, the less effort politicians put into their work for the same outcomes, the more ability they possessed. The model highlighted the trade-off between the discouragement and competition effects, with the trade-off between party service and electoral success mostly being a product of the party’s primary incentive for candidates' nomination.

Interestingly, the model also suggested that a mediocracy functions differently in majoritarian election systems. Majoritarian systems, such as Britain’s First Past the Post system for House of Commons elections, tend to be competitive due to their winner-take-all natures. In these systems, parties are encouraged to nominate more qualified candidates. But in proportional systems, political parties are more likely to nominate mediocre candidates due to the less competitive nature of the elections.

In the United States, most primaries use a proportional electoral model, suggesting that political parties may be incentivized to choose mediocre candidates. At the same time, the presidential election uses a majoritarian, winner-take-all system, and has produced objectively accomplished presidents like Barack Obama, a Harvard Law School graduate and the first black president of the Harvard Law Review, as well as former President George H.W. Bush. It’s important to remember, however, that the theory of mediocracy doesn’t apply only to presidential candidates, but to state level and congressional candidates as well. So if American voters are dissatisfied with their choices come November and looking to cast blame, they can now look beyond their own party honchos. They can blame the system as a whole.

Antonio Merlo is the former George A. Peterkin Professor and Dean of the School of Social Sciences at Rice University.

To learn more, please see: Mattozzi, A., & Merlo, A. (2015). Mediocracy. Journal of Public Economics, 130, 32-44.

Based on research Alexander W. Butler and Umit G. Gurun

• When local firms spend big on advertising, they influence media coverage.
• For firms with headquarters near local papers, this increased coverage boosts stock market valuations.
• Local media give local investors disproportionately positive but not necessarily accurate information about the value of locally headquartered firms.

The school of business at Rice University was founded largely thanks to the largesse of entrepreneur Jesse H. Jones, owner of the Houston Chronicle through the first half of the 20^th century. Like other power brokers before him, Jones understood the media’s muscle. While the vehicles for delivering news have multiplied almost unimaginably since Jones’ day, newspapers still hold significant sway. Venture capitalists scour for facts to hone a competitive edge. Wall Street analysts pore over numbers for the perfect strategic investment. PR pros release statements in hopes of sweetening company coverage.

It’s no surprise, then, that the way media chooses to present information actively influences firms and investors. Less obvious, however, is the way firms influence reporting. Alexander W. Butler, a finance professor at Rice Business, and his colleague Umit Gurun quantified this influence by studying the supply-and-demand driven mechanics behind reporting on companies.

Using a database of news reported by Dow Jones Newswire, The Wall Street Journal and eight major local newspapers as well as a financial dictionary, the researchers measured what they called “media slant” ⁠— that is, story presentation ⁠— by counting the number of negative financial words in firm-specific news stories. They then tested whether local and national media delivered more favorable stories about local firms; the researchers hypothesized this might be the case, since the firms’ employees were likely part of their readership. The researchers then tested if local and national media had the monetary wherewithal to support investigative journalism. Finally, they tested whether firms advertising in local and national media caused favorable media slant.

The researchers found no strong evidence that readers preferred upbeat stories about local firms, nor that media tailored stories about those firms to try to please readers. They also found no evidence media budgets directly affected production of strong journalism.

But Butler and Gurun did find that local firms advertising in local papers enjoyed more positive coverage, or what they termed hype. Local firms’ ad spending, the authors contended, affects media slant because advertising generates the major chunk of media revenue. The conflict of interest is obvious: Consciously and even unconsciously, the media turns from watchdog to cheerleader simply because of the source of its lifeblood.

Butler and Gurun made this connection through what’s called a natural experiment: studying a phenomenon occurring in real life. Their findings: Local media is particularly susceptible to the soft power of local advertising.

Remember a world without Craigslist? The free website first entered the market in October 2003 in two pilot cities, Pittsburgh and St. Louis. Almost overnight, newspaper classified ads became a thing of the past. No longer could papers rely on non-corporate advertising to pay their bills. The ripple effects were broad. In markets where Craigslist had entered, Butler and Gurun found, the tone of newspaper articles about local firms changed measurably, and became abnormally positive compared to similar coverage in other markets at the same time.

As corporate advertisers increasingly became a lifeline for newspapers, Butler and Gurun found, the resulting hype translated into higher stock market valuation for firms with headquarters close to the local papers. This especially held true for firms that issued little information and for firms with high arbitrage costs. Butler's and Gurun’s research also shed light on how market participants invest. Local media, they found, give investors a disproportionately positive ⁠— though not necessarily accurate ⁠— view of local firms’ valuation. The results help explain what’s called home bias, investors’ tendency to put more money into companies close to home.

The takeaway? Whoever finances news organizations helps shape the stories they tell. And stories drive business: not simply public perception of those businesses, but the actual choices made by consumers and investors. Butler's and Gurun’s research uncovers with new precision exactly how much news content varies depending on the characteristics of the advertisers that keeps that news provider alive. One of the cardinal rules for reporters, Butler and Gurun show, is equally germane for investors prospecting for firms.

Consider the source.

Alexander W. Butler is a professor of finance at Jones Graduate School of Business at Rice University.

To learn more, see: Gurun, U. G., & Butler, A. W. (2012). Don't believe the hype: Local media slant, local advertising, and firm value. Journal of Finance, 67(2), 561-598.

Based on research by Stephen A. Zeff

• The debate about whether accounting should be based on principles or rules should focus on auditors rather than on standard-setting institutions.
• Interpreting the phrase “present fairly” just to mean fulfilling Generally Accepted Accounting Principles, or GAAP, can lead in misleading accounting.
• Letting auditors themselves evaluate fair presentation, independent of GAAP, would allow them to judge accounting practice by principles rather than by checking off boxes stating rules.

Is good accounting based on principles or on rules? It’s an ongoing debate within the industry, with most skirmishes taking place over the standards set by the Financial Accounting Standards Board. But Stephen A. Zeff, an accounting professor at Rice Business, argues it makes more sense to focus on external auditors. In a 2007 historical/opinion paper, Zeff proposes altering the current language describing their duties.

Currently, auditors assessing a company’s financial position must opine whether the firm’s financial statements “present fairly…in conformity with generally accepted accounting principles,” or GAAP. The problem, Zeff argues, is that there are often several options to choose from among those included in GAAP. Under certain circumstances, those choices or the prescribed GAAP procedure itself can create misleading financial statements.

Instead, Zeff calls for a requirement that auditors provide separate opinions, first on whether the information in the financial statements is presented fairly, and second, whether all accounting choices are in accordance with GAAP. He contends this would foster professional judgment in the accounting profession and lead to a greater reliance on principles rather than rules. Zeff’s proposal is by no means without precedent in the United States. In his article, he carefully outlines the history of the phrase “present fairly": from its introduction by an American Institute of Accountants’ special committee in 1934, to its widespread adoption by 95 percent of auditors by 1937, to its 1939 linking with GAAP. Zeff also points out that from 1946 to 1962, auditing firm Arthur Andersen & Co. actually provided dual opinions in their audits of financial statements, decoupling their opinion “present fairly” from their opinion on whether the company’s financial statements complied with GAAP.

Zeff outlines three variations on how the dual opinion could work today. First, a “fairness” opinion would evaluate the company’s choice to use a non-GAAP accounting choice, in cases where a company and auditor believe a GAAP method is unacceptable. There has been a history of such practice already, and, as Zeff points out, “Somehow, corporate financial reporting was not thrown into chaos because of these announced departures from GAAP measures.”

Second, the auditor would offer an opinion on a company’s choice of among many GAAP methods, assessing whether the company’s pick was appropriate.

And third, the audit report would include a “fairness” opinion on whether a company’s non-GAAP accounting method over a GAAP method was in fact superior. Zeff concedes this last option would cause the most difficulty, because it represents the auditor recommending that the company depart from GAAP in order to present financial information fairly. But, he suggests, this is also an example of how an auditor would build a reputation for professionalism.

In recent years, Zeff argues, complaints over diminished meaning in financial reporting have spiked. At the same time, so have expectations for financial reporting. Separating the auditor’s opinion into two portions, Zeff proposes, would provide shareholders and the market with truly useful information.

Stephen A. Zeff is the Keith Anderson Professor of Accounting​ at Jones Graduate School of Business at Rice University.

To learn more, please see: Zeff, S. A. (2007). The primacy of “present fairly” in the auditor's report. Accounting Perspectives, 6(1), 1-20.

Based on research Anastasiya Zavyalova, Mike Pfarrer, Rhonda K. Reger and Timothy Hubbard

• Research findings about the effects of a good reputation after a negative event have been mixed.
• According to some findings, a sterling reputation builds a useful stock of goodwill; according to others, a good name is a burden because it raises expectations that can be dashed.
• New research shows how this works. A good reputation helps a university that’s in trouble when the stakeholders identify personally with it – and harm it if they don’t have a personal link to the school.

It’s easy to think this maxim is a simple key for professional survival. In good times, after all, a sparkling name draws new prospects; in bad times, a history of excellence may earn a second chance. But reputation actually isn’t always the best shield for an organization facing crisis, according to a study coauthored by Anastasiya Zavyalova, an assistant professor in strategic management at Rice Business. Studying the impact of what they call “negative events,” Zavyalova and her team looked at the behavior of donors after the university they helped had a major NCAA infraction. What they found was surprising. The less a stakeholder was emotionally and cognitively bound to the school, the less a good reputation helped.

Instead, for these stakeholders with low identification — weak personal links to the organization — a good reputation undermined their loyalty once that good name was tarnished. Organizations with lower profiles actually lost less of this type of stakeholder loyalty.

Zavyalova’s findings advance a much-debated question on the benefits of reputation. While intuition and grade school teach that a good name is a personal asset, past researchers have found that for organizations, that’s not always so. According to some findings, Zavyalova’s team writes, “A high reputation is a benefit because of the stock of social capital and goodwill it creates.” But other research shows that a sterling reputation makes matters worse when an organization is in trouble. A good name, in some cases, is “a burden because of the greater stakeholder attention and violation of expectations associated with a negative event.” In other words, the disappointment is greater.

To test when a good name helps and when it hinders, Zavyalova and her colleagues studied donor data from 658 U.S. universities. Identifying the donors as “stakeholders,” the researchers analyzed the giving patterns of alumni and non-alumni after a so-called “negative event” — major reported infractions of NCAA rules.

What they found was that non-alumni, or low-identification stakeholders, cut back their giving in greater numbers if the school had a high reputation. (The researchers measured reputation by rankings from U.S. News and World Report). These donors, it turned out, actually proved more loyal to schools with lesser reputations when they ran into NCAA trouble.

A good reputation only helped when the donors were alumni, or in other words, felt a personal link with the school. For these high-identification donors, the writers theorized, “the stock of social capital and reservoir of goodwill” influenced their views. According to previous research, such donors bask in the reflected glory of their school when it’s in the ascendant — and take it personally if negative events threaten the school’s profile. As a result, they may cut the school some slack, attributing the negative event to situational factors.

In fact, the researchers found, high-reputation schools actually got a bump in support from their high-identifying stakeholders after an increase in the number of NCAA violations — at least for awhile. When a “negative event” was too great in magnitude, it appeared to turn these stakeholders against the school as well.

These insights suggest strategies for managers. First, in industries where negative events typically occur in some volume, it may not make sense to cultivate high personal identification at all. Second, since the two types of stakeholders react so differently, a manager of a high-reputation organization might deploy different responses when there are problems. One approach: for low-identification stakeholders, reduce the perceived volume of wrongdoing by publicly sharing plans to address the problem. The high-identification stakeholders might merit another tactic: remind them of their close bond with the organization — and ask for some loyalty during a troubled time.

Anastasiya Zavyalova is an associate professor of management at Jones Graduate School of Business at Rice University.

To learn more, please see: Zavyalova, A., Pfarrer, M., Reger, R., & Hubbard, T. (2015). Reputation as a benefit and a burden? How stakeholders’ organizational identification affects the role of reputation following a negative event. Academy of Management Journal, 59(1), 253–276.

Based on research Hajo Adam (former Rice Business professor), Marwan Sinaceur, Gerben A. Van Kleef and Adam D.Galinsky

• Purely hard-nosed negotiation doesn’t work as well as alternating toughness with positivity.
• Negotiators faced with mood swings feel a loss of control and make greater concessions.
• Emotional approaches that win concessions in short-term negotiations may not work in the long term.

Level-headed Mr. Spock of the Starship Enterprise would not have made a good negotiator. According to Hajo Adam, a former professor at Rice Business, and colleagues Marwan Sinaceur of École Supérieure des Sciences Economiques et Commerciales (ESSEC), Gerben A. Van Kleef of the University of Amersterdam and Adam D. Galinsky of Columbia University, it’s a negotiator’s “emotional inconsistency and unpredictability" that can lead to concessions. Not Vulcan-like emotional control.

That’s essentially because emotional unpredictability on one negotiator’s part makes the other negotiator feel insecure and willing to concede. Historians have noted this tendency dating back to the time of Elizabeth I, when she often showed “baffling” levels of emotional inconsistency during negotiations with foreign powers, and was rewarded by their greater concessions. More recent political leaders, such as Nikita Khrushchev and Charles de Gaulle, have also cultivated auras of unpredictability. Appearing inconsistent and unpredictable, in fact, is a tenet of U.S. military strategy: the U.S. Strategic Command deems such an approach “essential to deterrence.”

The same principles apply to business negotiations.

Previous negotiation research explored the role of unchanging, consistently communicated emotions, such as anger. A good cop/bad cop strategy, in which negotiators alternate anger with happier emotions, leads to better results. But because those studies had not separated the emotions displayed from the offers being made, it wasn’t clear if a negotiator’s acceptance of terms was based on emotional expressions or offers.

In three experiments designed to separate emotions from offers, Adam and his fellow researchers showed a clear link between emotional unpredictability and winning concessions. Unpredictability from one party, they found, led to feelings of “loss of control” on the other side. Insecure negotiators then made weaker demands and greater concessions.

In one experiment, post-graduate business management students sat face to face, negotiating terms of a prospective business venture according to a script. Their proposals regarding profit sharing, manufacturing facilities, etc., remained constant, but the emotions they displayed ranged from constant anger and negativity in one paradigm, to “good cop/bad cop” alterations in the other. As expected, student negotiators whose counterparts displayed emotional shifts felt less control over the procedure, and as a result made greater concessions.

A second experiment honed in on the emotions expressed in a negotiator’s final offer. After a series of emotional switches, a negotiator who closed on a negative note, rather than an upbeat one, got better results.

Of course, taking a Jekyll and Hyde approach to negotiations might create its own problems. What if your unpredictability led your counterpart to think that you’re emotionally unstable, if not crazy? Is this a real risk? Or, less dramatically, what if your fluctuations make the other negotiators not take the process seriously because they don’t think that you do? 

The team’s third experiment indicated that these fears were unfounded. Negotiators, they found, tended to take their counterparts’ level of emotion at face value. They didn’t laugh at the mood swings. 

That’s not to say negotiators should put on their crazy hats before entering talks. It’s true that in short-term, or even one-shot, dealings that fluctuating between basic emotions such as happiness, anger and disappointment can be a winning formula. But, the researchers note, negotiations that take place over a longer period might require a more measured approach.

Finally, psychological approaches to negotiation may not trump the power of a competing offer. If your counterpart already has an attractive offer in hand, your ups-and-downs likely won’t faze her.

Those exceptions aside, the evidence now shows that in negotiations, it’s better to leave your opposite number guessing. A little insecurity never hurt anybody — as long as it's on the other side.

Hajo Adam is a former assistant professor of management at Jones Graduate School of Business at Rice University.

To learn more, please see: Sinaceur, M., Adam, H., Van Kleef, G. A., & Galinsky, A. D. (2013). The advantages of being unpredictable: How emotional inconsistency extracts concessions in negotiation. Journal of Experimental Social Psychology, 49, 498-508.

Based on research by Yan Anthea Zhang, Robert E. Hoskisson and Wei Shi

• Contemplating mortality can mute a CEO’s aggressiveness in pursuing large acquisitions.
• Because CEOs are less likely to delegate acquisition decisions than other decisions, acquisition patterns can faithfully capture aspects of a CEO’s response to the death of a peer.
• CEOs at companies that have experienced the death of an independent director seek fewer acquisitions in the post-director death period — especially fewer large acquisitions.

Researchers pay considerable attention to fluctuations in stock market performance after a key company leader dies. But how does such an event affect the surviving CEO? After the 2016 death of company founder and former CEO Aubrey McClendon, for instance, the stock price at Chesapeake Energy markedly rallied. Less obviously, McClendon’s death may have heightened mortality awareness among his social peers — an outcome which actually can shape strategic choices.

Wei Shi, a former Rice Business doctoral candidate, Emeritus Rice Business Professor Robert E. Hoskisson and Professor Yan Anthea Zhang decided to study how an independent director’s death affects CEO acquisition decisions. Blending current research in social psychology with analyses of firm acquisition patterns, the researchers found a strong correlation between the recent death of an independent director and less vigor from the surviving CEO in seeking acquisitions, especially large ones. The dynamic, the researchers found, was more pronounced when the death was sudden.

Historically, studies on executive mortality have focused on reactions from investors. Researchers in management and finance have shown that the stock market reacts negatively to the death of a CEO, but positively to the demise of a board chairman. Other researchers have found that firm stock prices experience a striking drop after independent director death announcements, suggesting that independent directors play a key role in corporate governance.

For their own study, the team looked at a sample of large U.S. public firms, and interviews with corporate CEOs and executive search consultants.

The researchers examined a sample of 296 independent director deaths between 2002 and 2012. The sample excluded the deaths of executive directors and independent board chairs; this is because such deaths can prompt direct organizational disruptions, which can result in fewer acquisitions in the post-death period. The researchers then divided their sample into sudden deaths including heart attack, stroke, accidents, or when causes that were unreported but described as unexpected, unanticipated or sudden, and non-sudden deaths.

To create a theoretical framework, the researchers drew from two contrasting social psychology models: terror management theory and posttraumatic growth theory. Both address how the death of others can influence the choices of surviving individuals, yet offer different explanations.

According to research in terror management theory, humans’ instinct for self-preservation can mean that after the death of a peer, survivors want to defend their current world view in a bid to sustain self-esteem. “Bolstering one’s worldview and increasing self-worth,” the authors explain, “can extend one’s symbolic existence and help cope with mortality terror.”

In capitalist cultures such as the U.S., the corporate worldview prioritizes wealth and fame, and evidence suggests that higher compensation and social status play an important part in CEO’s acquisition choices. After the death of a peer, terror management theory holds, it’s logical that a CEO might intensify pursuit of these goals.

Posttraumatic growth theory proposes a different explanation. The mortality of others, this research suggests, actually prompts re-evaluation of established ideals. Rather than heightening interest in extrinsic goals like wealth and status, these meditations may shift a person’s focus to inner concerns such as autonomy, relatedness and self-growth. According to this theory, a CEO will scale back on seeking acquisitions after the death of a close peer.

The team's findings were consistent with the second theory. CEOs who witnessed an independent director's death, the researchers discovered, launched fewer acquisition efforts in the period after the death of an independent director on the firm’s board. The director’s death, it seemed, really did heighten the surviving CEO's sense of mortality. The researchers also found that CEOs who served as an outside director on boards where an independent director died did few acquisitions at their home firms after this loss. Suddenly, these leaders seemed to attach more value to a quieter life and less value to aggressive pursuits such as acquisitions that promise more compensation and status.

You can’t take it with you, masters of the universe often are chided. Curiously, when one of their number departs, the craving for earthly treasures also seems to fade for their peers.

Yan Anthea Zhang is the Fayez Sarofim Vanguard Professor of Management in Strategic Management at Jones Graduate School of Business at Rice University.

Robert E. Hoskisson is the George R. Brown Emeritus Professor of Management at Jones Graduate School of Business at Rice University. 

To learn more, please see: Shi, W., Hoskisson, R. E., & Zhang, Y. A. (2016). Independent director death and CEO acquisitiveness: Build an empire or pursue a quiet life? Strategic Management Journal, 38(3), 780-792.

MBA program moves up 8 and is now among top 25 in three major rankings

The Master of Business Administration program at Rice University’s Jones Graduate School of Business is ranked No. 25 (up from No. 33 last year) in U.S. News and World Report’s new analysis of the best full-time MBA programs in the nation for 2017.

The Rice MBA is the only full-time MBA program in the last decade to go from below the top 40 to the top 25 in the U.S. in all three top rankings of business schools: from 2006 to the present, Bloomberg Businessweek, from unranked to No. 19; U.S. News, from No. 44 to No. 25; and Financial Times, from No. 41 to No. 24 (in the U.S.).

The Jones School’s graduate entrepreneurship program was ranked No. 14 in U.S. News’ MBA specialty rankings.

“With the support of Rice, our alumni, and the Houston community, we moved the Rice MBA from top 50 to a solid top 25,” said Jones School Dean Bill Glick. “Today’s ranking reflects our long-term success in increasing research productivity and impact, graduates’ career success, programmatic excellence and attracting the best students.”

U.S. News ranked MBA programs based on quality assessments by employers and AACSB accredited schools, placement success and student selectivity. Businessweek rankings emphasize employer perception, alumni and student satisfaction and career success. Financial Times gives more weight to career success, faculty research and global diversity.

The biggest contributor to Rice’s rise in the most recent ranking was increased recognition of the school’s programs and graduates among corporate recruiters, an increase in graduates’ average starting salary and bonus and the percentage of graduates employed at graduation.

The Rice MBA full-time program provides students with a comprehensive MBA learning experience that combines specialized coursework and real-world experience to improve and amplify their strategy, leadership and critical decision-making credentials. The program features innovative classes, expert faculty and a diverse group of candidates who often become colleagues for a lifetime.

The Jones Graduate School of Business is consistently recognized by several rankings publications for its programs, including the Rice MBA, Rice MBA for Executives and Rice MBA for Professionals. The school is internationally known for the research and thought leadership of its faculty, which can be found on ricebusinesswisdom.com.

For more information on Rice MBA programs, visit http://business.rice.edu. To view the complete U.S. News and World Report rankings and methodology information, visit http://grad-schools.usnews.rankingsandreviews.com/best-graduateschools/top-business-schools.