Archive for January, 2007

Blogroll for Social-Science Geeks

| Peter Klein |

New items for your blogroll:

Wow, the web really does offer something for everyone.

26 January 2007 at 12:52 am Leave a comment

Built to Regress to the Mean

| Peter Klein |

Of 35 “Excellent” companies studied in In Search of Excellence, 30 declined in profitability over the 5 years after the authors’ study ended in 1979. . . . Similarly, of 17 of the 18 “Visionary” companies studied in Built to Last, only 8 outperformed the S&P 500 market average for the 5 years after the authors’ study ended in 1990.

This is from Phil Rosenzweig’s The Halo Effect (Free Press, 2007) (I’m quoting this summary in CFO Magazine). Rosenzweig’s book reads like a primer on research methods for producers (and consumers) of popular management literature. Rosenzweig, a management professor at IMD, explains the problem of selection bias, the difference between correlation and causality, the need to compare rival explanations, the difference between absolute and relative performance, and more.

“Some of what I talk about in The Halo Effect is Research Design 101,” Rosenzweig tells CFO. “You gather your independent variables, independently of the thing you’re trying to explain. You don’t confuse correlation with causality, and you don’t confuse ends with means. You control for other variables. It’s basic stuff.”

But that basic stuff is hard to translate into a BusinessWeek best-seller.

Thanks for the link to Gary Peters, who notes that the book might be good reading for a doctoral seminar on research methods.

25 January 2007 at 1:03 am 3 comments

Does Sarbanes-Oxley Reduce Innovation?

| Peter Klein |

Thanks to Sarbanes-Oxley, Apple customers can’t take advantage of faster wi-fi cards without paying an extra fee. That’s Apple’s explanation, anyway:

With a quick software update from Apple, customers’ “g” machines would become “n.” Voila, a surprise instant upgrade that means happy customers and good karma for Apple. . . .

According to Apple, however, accounting rules have complicated matters. . . . On the one hand, if it had announced that its computers were shipping with n-capable cards that would be activated later, it would have had to wait to record some of the revenue garnered from each computer until it actually activated the feature. That would have been an accounting nightmare. On the other hand, not having acknowledged the feature when the machines first shipped, Apple can only count it as a valuable feature if it charges users for activation. That way, the original product was “complete,” and accounting rules let Apple count all of the revenue when the machines were sold — the intuitive, straightforward accounting approach that a reasonable observer would expect. . . .

The rule that made Apple’s mess predates Sarbanes-Oxley — but Sarbox’s stiffened penalties may well have changed Apple’s calculus.

This is from a piece in the current issue of Writer Jerry Brito also quotes Jim Clark’s letter resigning from the board of Shutterfy:

Sarbox dictates that I not Chair any committee due to the size of my holdings, not be on the compensation committee because of the loan I once made to the company, not be on the governance committee, and it even dictates that some other board member must carry out the perfunctory duties of the Chairman. . . . What’s left is liability and constraints on stock transactions, neither of which excite me.

25 January 2007 at 1:02 am 1 comment

A Good Use of PowerPoint

| Peter Klein |

Make your customer-service complaint come to life. (HT: Fred Tung. And see this for the backstory.)

24 January 2007 at 4:12 pm Leave a comment

“Age Heaping,” Numeracy, and Human Capital

| Peter Klein |

Important economic and managerial concepts like social capital and human capital, as latent variables, are difficult to discern in aggregate or historical data. My very clever friend (and occasional O&M commenter) Brian A’Hearn suggests that “age-heaping” — rounding up or down one’s self-reported age to the nearest five or zero — may be a good proxy for human capital. From Brian’s paper with Jörg Baten and Dorothee Crayen, “Quantifying Quantitative Literacy: Age Heaping and the History of Human Capital”:

As signature ability can proxy for literacy, so accuracy of age awareness can proxy for numeracy, and for human capital more generally. A society in which individuals know their age only approximately is a society in which life is governed not by the calendar and the clock but by the seasonal cycle, in which birth dates are not recorded by families or authorities, in which numerical age is not a criterion for access to privileges (e.g. voting, office-holding, marriage, holy orders) or for the imposition of responsibilities (such as military service or taxation), in which individuals who know their birth year have difficulty accurately calculating their age from the current year. Within a society, the least educated and those with the least interaction with state, religious, or other administrative bureaucracies will be least likely to know their age accurately. Age awareness thus tells us something about both the individual and he society he or she inhabits. Approximation in age awareness manifests itself in the phenomenon of age heaping in self-reported age data. Individuals lacking certain knowledge of their age rarely state this openly, but choose instead a figure they deem plausible. They do not choose randomly, but have a systematic tendency to prefer “attractive” numbers, such as those ending in 5 or 0, or even numbers, or in some societies numbers with other specific terminal digits. Age heaping can be assessed from any sufficiently numerous source of age data: census returns, tombstones, necrologies, muster lists, legal records, or tax data, for example. While care must be exercised in ascertaining possible biases, such data are in principle available much more widely than signature rates and other proxies for human capital.

Brian and his coauthors use age-heaping data to generate estimates of human capital in Europe over a long period of time, finding substantial increases in human capital just before the Industrial Revolution.

24 January 2007 at 12:40 am 1 comment

Peter Abell’s Organization Theory Textbook

| Peter Klein |

Peter Abell’s textbook Organisation Theory: An Interdisciplinary Approach is available on the web for free. (Technically it’s not a textbook, but a London School of Economics “subject guide.”) Congratulations to Peter for his fine work. (HT: Teppo)

24 January 2007 at 12:36 am Leave a comment

Our Scientistic Age

| Peter Klein |

Maxwell Gross at Right Reason points us to an AP story linking teen promiscuity to raunchy pop music. (Here is the study referred to in the news item.) Notes Max: “A sure sign of the scientism of our age is the presence of those who will not believe a blindingly obvious truism unless preceded by the phrase, ‘studies show. . . .'”

24 January 2007 at 12:36 am 4 comments

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Nicolai J. Foss and Peter G. Klein, Organizing Entrepreneurial Judgment: A New Approach to the Firm (Cambridge University Press, 2012).
Peter G. Klein and Micheal E. Sykuta, eds., The Elgar Companion to Transaction Cost Economics (Edward Elgar, 2010).
Peter G. Klein, The Capitalist and the Entrepreneur: Essays on Organizations and Markets (Mises Institute, 2010).
Richard N. Langlois, The Dynamics of Industrial Capitalism: Schumpeter, Chandler, and the New Economy (Routledge, 2007).
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Nicolai J. Foss and Peter G. Klein, eds., Entrepreneurship and the Firm: Austrian Perspectives on Economic Organization (Elgar, 2002).
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