© 2014 Pankaj Ghemawat © 2009 Pankaj Ghemawat Management and Market Failures Pankaj Ghemawat NYU...
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© 2014 Pankaj Ghemawat © 2009 Pankaj Ghemawat Management and Market Failures Pankaj Ghemawat NYU Stern/IESE October 16, 2014
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© 2014 Pankaj Ghemawat Views from Business - II Perhaps the biggest danger to capitalism is that short-term approaches to running and investing in companies—the “quarterly capitalism” responsible for the near-meltdown of the financial system—still reign. --Dominic Barton, “Capitalism for the Long Run” Investments in different types of innovation affect economies (and companies) in very different ways— but are evaluated using the same (flawed) metrics. Specifically, financial markets—and companies themselves—use assessment metrics that make innovations that eliminate jobs more attractive than those that create jobs. --Clayton Christensen, “The Capitalist’s Dilemma” Capital markets will undoubtedly continue to pressure companies to generate short- term profits, and some companies will surely continue to reap profits at the expense of societal needs. But such profits will often prove to be shortlived, and far greater opportunities will be missed. --Michael Porter and Mark Kramer, “Creating Shared Value”
Transcript of © 2014 Pankaj Ghemawat © 2009 Pankaj Ghemawat Management and Market Failures Pankaj Ghemawat NYU...
© 2014 Pankaj Ghemawat© 2009 Pankaj Ghemawat
Management and Market Failures
Pankaj GhemawatNYU Stern/IESE
October 16, 2014
© 2014 Pankaj Ghemawat
Views from Business - I
Capitalism needs to evolve, and that requires different types of leaders from what we’ve had before. Not better leaders, because every period has its own challenges, but leaders who are able to cope with today’s challenges .
--Paul Polman, Unilever CEO
While I remain convinced that capitalism is the economic system best suited to advancing the human condition, I’m equally persuaded that it must be renewed, both to deal with the stresses and volatility ahead and to restore business’s standing as a force for good, worthy of the public’s trust.”
--Dominic Barton, Managing Partner, McKinsey
© 2014 Pankaj Ghemawat
Views from Business - IIPerhaps the biggest danger to capitalism is that short-term approaches to running and investing in companies—the “quarterly capitalism” responsible for the near-meltdown of the financial system—still reign.
--Dominic Barton, “Capitalism for the Long Run” Investments in different types of innovation affect economies (and companies) in very different ways— but are evaluated using the same (flawed) metrics. Specifically, financial markets—and companies themselves—use assessment metrics that make innovations that eliminate jobs more attractive than those that create jobs.
--Clayton Christensen, “The Capitalist’s Dilemma”
Capital markets will undoubtedly continue to pressure companies to generate short-term profits, and some companies will surely continue to reap profits at the expense of societal needs. But such profits will often prove to be shortlived, and far greater opportunities will be missed.
--Michael Porter and Mark Kramer, “Creating Shared Value”
© 2014 Pankaj Ghemawat
Five Propositions about (the Insignificance of) Market Failures
1. Governments should not intervene in free markets.
2. Free markets always lead to vigorous competition.
3. Farsighted companies can be trusted to do well by the environment.
4. Smart companies can handle risks and market volatility on their own.
5. Free markets tend to lead to a fair distribution of income.
© 2014 Pankaj Ghemawat
Survey Results
1. No Govt.Intervention
2. Always Vigorous Competition
3. No Real Externalities
4. Private Risk Management
5. No Distribution Problems
BA/Fin
Other fields
Specialization
3.383.25 3.562.82 2.92
3.00 3.20 2.60 3.32 2.71
© 2014 Pankaj Ghemawat
Determinants of Mean Responses
Coefficient t Statistic
Republican Dummy
Bus. Education Dummy
+
+ 9.9
17.3
© 2014 Pankaj Ghemawat
In-Process Question
Are we doing enough to teach (future) managers about market failures?
© 2014 Pankaj Ghemawat
Management and Market Failures
Market Failures
NO YES
Management Failures
NO
YES
Nirvana Economists
Reality?Business Thinkers
![ECON480 HY International Business Varela [Fall 2015]...Ghemawat,!Harvard!Business!Review,!September!2001!! Pankaj Ghemawat is Global Professor of Management and Strategy and Director](https://static.fdocuments.us/doc/165x107/5eceb802ac8f391609197e5e/econ480-hy-international-business-varela-fall-2015-ghemawatharvardbusinessreviewseptember2001.jpg)
