Category: Faculty Insights

Data dilemma: To raise or not to raise...

Posted by MIT Sloan Executive Education - 12 days ago

By Roberto Rigobon, Society of Sloan Fellows Professor of Management and Professor of Applied Economics at MIT Sloan; a research associate of the National Bureau of Economic Research; and a visiting professor at IESA.

Roberto Rigobon

Nearly seven years ago the Federal Reserve put its benchmark interest rate close to zero as a way to bolster the economy and has not raised that rate since. For the past several months, the Fed has struggled to decide when it will dictate an increase, and it appears the announcement is imminent this week. While this increase is actually more of a "normalization," a December tightening of rates will have lasting consequences. 

First, let's address why leaving interest rates too low for too long is a bad idea: primarily because low interest rates can lead to bad behavior. Banks might take too much risk--after all, almost every investment looks good when the financing cost is close to zero. Individuals are also more likely to borrow too much and save too little--hence increasing leverage ratios. What harm is a loan when the interest rate is negligible?

By moving interest rate targets up or down, the Fed attempts to achieve maximum employment, stable prices and stable economic growth. The Fed will tighten interest rates (or increase rates) to stave off inflation. Conversely, the Fed will ease (or decrease rates) to spur economic growth. Raising the rates is good for the economy, but only after the economy has consolidated and is in good health. Which, right now, it is.

So if the economy is strong, why is it taking so long for the Fed to decide? To put it bluntly, they have bad data.

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Simple Rules: A new book by strategy expert Donald Sull

Posted by MIT Sloan Executive Education - 3 months and 5 days ago

Simple Rules small

The world is highly complex, and we struggle to manage the complexity of it every day. Most os us accept this complexity as unavoidable, attempting to manage the complex systems we face with complicated solutions. But meeting complexity with complexity can create more confusion than it resolves. So how can people better manage the complexity inherent in the modern world?

Donald Sull, Senior Lecturer at MIT Sloan, swears by simple rules, whether in his personal life or in helping companies he consults with make better decisions. His latest book, Simple Rules: How to Thrive in a Complex World, co-authored with Stanford University's Kathleen Eisenhardt, aims to help more people put these simple rules in practice.

A decade ago, in the course of studying why certain high-tech companies thrived during the internet boom, the authors discovered something surprising: To shape their high-level strategies, companies like Intel and Cisco relied not on complicated frameworks but on simple--and quite specific--rules of thumb. The simple rules these companies had mapped out in order to manage complex processes helped them make on-the-spot decisions, adapt to rapidly changing circumstances, and bridge the gap between strategy and execution. All this even though they were in extraordinarily complex, challenging, and fast-moving industries.

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Getting to the right answers fastest

Posted by MIT Sloan Executive Education - 4 months and 7 days ago

Contributed by MIT Sloan Senior Lecturer Steve Spear. Spear teaches in Creating High Velocity Organizations and is author of The High Velocity Edge: How Market Leaders Leverage Operational Excellence to Beat the Competition.

There are many different kinds of companies--those that are highly competitive, those on a mission, those who are life-style companies and those who are also-rans. Or, more simply, some companies strive to be the Coca-Cola of their market, others are happy being Avis ("We Try Harder"), and still others are fine being Wendy's, happily number three in their market.

Those that own or want to own their market have to get to the right answers first. The question is how they achieve that. After all, highly competitive companies often have the same set of opportunities and challenges. Look at the smartphone market to understand the value of being first. 

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Leader-led learning: The great differentiator

Posted by MIT Sloan Executive Education - 6 months and 3 days ago

Contributed by MIT Sloan Senior Lecturer Steve Spear. Spear teaches in Creating High Velocity Organizations and is author of The High Velocity Edge: How Market Leaders Leverage Operational Excellence to Beat the Competition.

Certain organizations "punch above their weight," generating far more value (that accrues to everybody, not just customers or just shareholders, etc.), faster, and more easily. This despite them having access to the same technical, financial, and human resources as all their counterparts--and thereby enjoying the same advantages and suffering the same constraints.1

This becomes a wickedly important differentiator: Either because of having to get more yield out of exactly the same resources available to everyone, or because of having to be on the cutting edge of bringing high value-add products and services to market ahead of rivals.

The difference? They know much better what to do and how to do it, so operate on a frontier of speed, timeliness, efficiency, effectiveness, safety, security, and so forth others barely perceive. As with all knowledge, the source of their profound knowledge is accelerated learning, and that accelerated learning is the consequence of garnering feedback out of experiences across the spectrum of operational, design, and developmental and using that to feed forward into the next cycle of experiences.

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Stress: It's a mind-body connection that affects us all

Posted by MIT Sloan Executive Education - 7 months and 29 days ago

No matter what we do in life, we all deal with some level of stress. As an executive leadership coach, medical doctor, neuroscientist, frequent keynote speaker and MIT Sloan Senior lecturer, Tara Swart certainly must know about stress.

Yet Swart, CEO of The Unlimited Mind, understands the connection between brain and body better than most—as well as how stress can affect both and manifest itself in different ways. For example, Swart says stress is "essentially a brain and body chemistry problem" that can affect a variety of different things, such as our ability to make decisions, concentration levels, how we express emotions, and the well being of our physical selves. Common symptoms of stress that manifest physically include back pain, headaches, clenched jaws, or nail biting.

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A reading list resolution that's easy to keep: Recent books by MIT Sloan faculty

Posted by MIT Sloan Executive Education - 10 months and 1 day ago

Each new year brings with it the inevitable list of resolutions to improve ourselves, personally or professionally. While some goals may be more difficult than others to attain, MIT Sloan Executive Education offers a goal that is easy to achieve: a reading list of business books from MIT Sloan experts. Check out these recent titles, written by our faculty. 

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It’s time to rethink wages

Posted by MIT Sloan Executive Education - 1 year and 4 months and 23 days ago

For the last year or so, there’s been a significant amount of news coverage around the wages paid to low-income earners, such as those working at fast food outlets and in retail stores. There have been public protests, calls for boycotts, and legislation to raise the minimum wage in some states.

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The digital business transformation imperative

Posted by MIT Sloan Executive Education - 1 year and 5 months and 13 days ago

“What exactly does a digital business transformation mean?” asked Michael Krigsman, CEO of Asuret, Inc., and moderator of the "CIO, CMO, CDO Perspectives on Digital Transformation" panel at The 2014 MIT Sloan CIO Symposium.

Each of the panelists—F. Thaddeus Arroyo, CIO of AT&T Services, Inc.; Robert Tas, CMO & SVP of Pegasystems; Tanya Cordrey, Chief Digital Officer (CDO) of Guardian News and Media; and George Westerman, Research Scientist at the MIT Center for Digital Business—had his or her own take on the digital transformation facing most businesses today. 

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