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Was Whole Foods Choking On Their -5% Net?

| David Hoopes |

I’ve used a couple of Ben and Jerry’s cases over the years. One of the interesting things about B&J is that they seem to suffocate under their desire to “do good.” In general, it seems they would have been able to donate a good deal more to charity if they had run their business to be a good business. Then, Ben and Jerry could have taken their salaries or capital gains or dividends and given them to their favorite charities.

Whole Foods, like B&J had a concentrated ownership for quite a while. I don’t know what it’s like now. For a long time John Mackey and his Dad owned 51%. John did not take a large salary. So, giving away Whole Foods’ profits was like he was spending his own money anyway. And, anyone involved with WFM after John got rid of his co-founders knew WFM was John’s thing.

The point with WFM is that it’s an unusual example of corporate charity in part because of concentrated ownership, the marketing benefits of donating money, and the political inclinations of many if not most of its employees (far more left-wing than J. Mackey). Unlike B&J, WFM did not suffocate itself by not paying professional executives. Also, Mackey never felt guilty about turning a profit and is a tried and true capitalist (guilt free).

I worked for Whole Foods when they only had two stores in Austin (oh so long ago). I’m afraid John considered me a pest (I suppose I was).

Did they ever buy Wild Oats? That’s another story.

29 November 2007 at 1:48 pm 2 comments

Integrity and the Academy: Are Academicians in a Position to Preach About Social Responsibility?

| David Hoopes |

Do college faculty — generally untrained in ethics (except for philosophy professors, etc.) — have any business teaching social responsibility and ethics? This question comes from my most recent post.

I interviewed for a job at the Army War College a few years back. I was fortunate enough to hear a high-ranking general speak to the students (mostly lt. colonels). One of things he said is that he stayed in the armed services because of the high integrity of its members. I know in some corners this will be scoffed at. However, I think there is no small amount of truth to this.

I thought, “Cannot say that about academia.” Why so cynical? There are many things one could complain about. There are more passive-aggressive people in the academy than most other place. Academics seem especially prone to speaking with a forked tongue.

The clearest example I can think of is the tenure process. Certainly the tenure process can bring the worst out in people. Beyond that, it is amazing how sexually biased the tenure process seems to be. It is especially amazing to see how entrenched the “old boy” network is among men who fancy themselves liberal or progressive.

I have no proof that the tenure process is sexually biased. Nevertheless, in management it certainly seems easy to think of women getting left out of the loop. Thus, fewer social interactions, fewer coauthored papers, less mentoring. Now part of this may have to do with where I have worked: schools that have had multiple discrimination and harassment charges brought against them.

Yet, I don’t think this is limited to management departments. It’s pretty strange that an institution that fancies itself as being so progressive is so backwards when it comes to mentoring and networking women through the old (or young) boys clubs.

Here is a link that offers some evidence. I found the stuff at the bottom of the page most useful.

27 November 2007 at 5:41 pm 10 comments

Teaching Social Responsibility

| David Hoopes |

I am on the planning committee and the goals committee here at Cal State Dominguez Hills. At a recent meeting it came up that one of the schools goals was academic excellence and social responsibility. I suggested that they are two very different topics but was roundly rebuked. I have a few problems with considering social responsibility to be part of the same goal as academic excellence for college professors.

My first complaint is that “social responsibility” is not very easy to define or operationalize. Usually, it seems to imply donating money to some left wing cause. I might be able to find some left wing causes I like. However, I’m not sure how teaching students to tithe is similar to teaching students a course of study or an academic discipline.

My second complaint is that I don’t think academicians are qualified to teach social responsibility. I admit to being jaded and cynical. But I do not find academicians to be shining examples of virtue. Getting a Ph.D. in management, economics, or sociology hardly qualifies one to determine what students should consider to be socially virtuous.

I do think colleges (especially state funded) have some obligation to promote citizenship and promote and encourage ethical and moral behavior. Additionally, I am very happy to have those who specialize in ethics and related topics to teach them (the philosophy department?).

However, again, I don’t see this as our primary mandate. I might feel better about this if I felt that academics were paragons of ethical and moral behavior. On the contrary, I am continually disappointed in the standards to which academicians hold themselves. Having worked a variety of odd and not so odd jobs before heading to the academy I feel pretty comfortable saying that academicians certainly do not appear to have superior ethical and moral behavior.

What, you might ask, makes me think of academics as being ethically or morally lacking? Well that’s for another post.

26 November 2007 at 11:52 pm 4 comments

Deconstructing Bob and Jeff

| David Hoopes |

For better or worse the hard-hearted authors at O&M have hurt the feelings of our colleagues in other fields. In the spirit of being more specific about why the bloggers here are so harsh I’d like to take a look at an award-winning paper from the Academy of Management Review (Ferraro, F., Pfeffer, J., and Sutton, R.I., “Economics Language and Assumptions: How Theory Can Become Self-Fulfilling”). In this paper we are told how the language of economics (the assumptions that people are selfish cheats) encourages people to be selfish cheats. Aside: in my opinion sociologists have a much darker image of humankind than economists (if we must make careless generalizations).

As I note in an earlier post, the idea of self-interest is often grossly misrepresented. Perhaps economists can thank themselves for this. I don’t know. However, it is important to examine this component of price theory by looking at its roots. In developing public policy toward government intervention in the allocation of goods (mercantilists vs. free traders in Smith’s day) allowing people to make their own decisions is more efficient than having a handful of people making the decisions for everyone. And even if individuals focus on their own needs the result for society is better than having a few people guessing at what everyone else wants and imposing their guesses.

The starting point of the AMR critique is the ever-present complaint about the economics world telling us all that we need to be selfish and greedy (make decisions based on our own self-interest). From here, our friends in the org. theory camp state, “If people are relentless in the pursuit of their own self-interest and equally relentless in the their lack of concern for others’ interests. . . .” What? Where did that second part come in? A very important bridge theory has been added. If people pursue their own self-interest then they also cannot care about anyone else. Management scholars wonder why their (our) work is not used in public policy debates. Small wonder. (more…)

20 November 2007 at 7:33 pm 7 comments

Organizational Learning: Observations from the Shadow of the Fires

| David Hoopes |

A few Mondays [more than a few now] ago the T.V. got turned on pretty early and we found a host of officials discussing a couple of very large fast-moving fires. Someone in charge of emergencies spoke. The sheriff spoke, the fire chief, and more. Winds were blowing above 40 miles per hour and fires were spreading . . . like wildfire! My wife and I started gathering important papers (my ES-137) and other things in case we needed to make a run for it.

We did have to evacuate. However, our house was fine except for some minor wind damage.

What amazed many in the San Diego area was how well local media, emergency institutions, the private sector, and the public coordinated. The news media were very helpful (wow!), fire fighters, sheriff’s office, and other such crews were clear about how people could help them (get out of the way), and local grocery stores delivered lots of food and other supplies to shelters.

It seems there was quite a bit of learning from the many problems that occurred in a previous fire (2003).

20 November 2007 at 7:25 pm Leave a comment

Monty Python and the Health Insurance Business in California

| David Hoopes |

My wife was talking to our dental insurance company the other day and John Cleese, Michael Paline, Eric Idle et al. came to mind.

Wife (Chris): I don’t understand why you haven’t paid us for this.”

Dental non-insurer: “You went over your limit.”

C: “It was our first visit.”

DN: “Sorry.”

“You don’t pay for teeth cleaning?”

“Oh yes. We do.”

“But you are not going to pay for this visit for teeth cleaning?”

“No, I’m sorry but you can only do it so many times per year.”

“That was the first time.”


“Can you tell me why you haven’t paid the January visit?”

“I don’t think we’ve received the claim.”

“I’ve sent you that claim five times”

“Oh, that’s right. Sorry. We need to see the x-rays.”

“The dentist sent you the x-rays 10 months ago.”

“Well, we don’t have them anymore.”

“Where are they?”

“We sent them back.”

“Where did you send them? I didn’t get them.”

“We sent them to who[m]ever sent them to us.”

“Who was that?”

“Whoever we sent them to.” (more…)

9 November 2007 at 12:50 pm 2 comments

Demsetz, Coase, Postrel, and Williamson

| David Hoopes |

A recent post by Nicolai ponders Demsetz’s approach to transaction costs. My understanding (interpretation) of Demsetz’s “The Theory of the Firm Revisited” is quite different from Nicolai’s. Here’s how I remember that paper.

One of Demsetz’s complaints about transaction costs economics is that a number of very different events are bundled together under the term “transaction.” Williamson’s take on transaction costs focuses largely on comparative governance costs. How does making sure a supplier doesn’t cheat you compare to making sure your employees don’t cheat you? Coase’s version of transaction costs is very different. Coase tends to talk about a variety of other frictions that can occur independently of governance costs. These are what Demsetz calls management costs. Demsetz thinks (quite correctly) that referring to these two types of costs using the same term is confusing. In his Nobel speech Coase notes how his beliefs were more consistent with Demsetz’s than with those emphasizing governance.

Steve Postrel and I (in disucssing capabilities in SMJ 1999) separate cooperation costs from coordination costs. I think of this as fitting the Williamson versus Demsetz and Coase types of transaction costs (or management costs as Harold says). Costs dedicated to aligning incentives are different from costs of making sure everyone has the same plan. Steve and I go on to differentiate the costs of sharing specialized knowledge from the costs of coordinating. (Notice how I moved from Coase and Demsetz to myself?!).

Back to Harold. Demsetz believes that you needn’t have oppourtunism to have organizations. Postrel (2003) in an earlier version compared knowledge and governance as theories of the firm. Where Demsetz believes firms economize on managerial costs (or Coasian transaction costs) Postrel believes that without opportunism the firm is unnecessary.

I’m more with Harold (at least in my own mind I’m not sure Harold really wants me tagging along).

5 November 2007 at 2:47 pm 3 comments

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Our Recent Books

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).
Nicolai J. Foss, Strategy, Economic Organization, and the Knowledge Economy: The Coordination of Firms and Resources (Oxford University Press, 2005).
Raghu Garud, Arun Kumaraswamy, and Richard N. Langlois, eds., Managing in the Modular Age: Architectures, Networks and Organizations (Blackwell, 2003).
Nicolai J. Foss and Peter G. Klein, eds., Entrepreneurship and the Firm: Austrian Perspectives on Economic Organization (Elgar, 2002).
Nicolai J. Foss and Volker Mahnke, eds., Competence, Governance, and Entrepreneurship: Advances in Economic Strategy Research (Oxford, 2000).
Nicolai J. Foss and Paul L. Robertson, eds., Resources, Technology, and Strategy: Explorations in the Resource-based Perspective (Routledge, 2000).