August 2004

Bendor, Bulow Named to Learned Society

Political economist Jonathan Bendor and economist Jeremy Bulow have been elected to the American Academy of Arts and Sciences.

Bendor, the Walter and Elsie Haas Professor of Political Economics and Organizations, has been at the School since 1979 and is a past director of the doctoral program. In 1996, his paper "A Model of Muddling Through" revitalized the debate over whether to make large, radical changes in programs and organizations or to take small, incremental steps. Bendor argued that there are some problems that are simply so complex and difficult that even the smartest, most persistent leader will be unable to find an optimal solution. As a result, decision-makers typically muddle through with small changes in the status quo.

Bulow, the Richard A. Stepp Professor of Economics, has been a member of the Business School faculty since 1979. He served as director of the U.S. Bureau of Economics of the Federal Trade Commission from 1998 to 2001. Spanning economics and finance, his research topics include industrial organization, international debt, pension funds, and auctions. Some recent papers have questioned the uses of money raised through a national cigarette tax, examined the causes of gasoline price spikes, and explored the effects of the Hatch-Waxman Act governing drug patents.

Their election to the academy in the spring of 2004 brings to 14 the number of Business School faculty who are members. The academy was founded in 1780 as an international learned society composed of the world's leading scientists, scholars, artists, business people, and public leaders. It is dedicated to promoting service and study through analysis of critical social and intellectual issues and the development of practical policy alternatives, fostering public engagement and the exchange of ideas, and mentoring a new generation of scholars and thinkers.

David Baron, a leader in the area of political economy and a former associate dean, was selected by the faculty to receive the 2004 Robert T. Davis Award for his service to the School. Baron, who is the David S. and Ann M. Barlow Professor of Political Economy and Strategy, was honored at a dinner in March.

In his introduction, Baron's colleague John Roberts recalled how as a young academic Baron taught at the University of Aix-en-Provence and the Catholic University of Louvain despite the fact he spoke "absolutely no French." Baron was committed to doing things "the right way," said Roberts, and managed to master French well enough in a few months to teach his courses in that language. Baron later spent 13 years on the faculty at Northwestern University, where he held the Morrison chair in decision sciences.

Baron "has continued to break new ground here in economics and particularly in political science," continued Roberts. "He has been a dutiful, generous, and responsible colleague and an outstanding teacher."

"By my count," added colleague David Brady, a political scientist, "he has had at least six papers in the American Political Science Review, which is more than most faculty of great universities have in that journal. I am personally pleased that he started in my academic field so late. I had a head start."

While serving as an associate dean of the School, Baron conceived the idea of a residential building that could be used during the academic year by MBA students and become a residence for participants in executive programs the rest of the year. The result was the Schwab Residential Center, dedicated in 1997.

In 1999, Baron was the first recipient of the PhD Distinguished Faculty Award, given by PhD students.

Nearly 10 years ago, Hau Lee and Seungjin Whang, codirectors of the Stanford Global Supply Chain Management Forum, started blaming the bullwhip effect for a host of expensive problems in the manufacturing supply chain. As information about demand for a product moves upstream in the manufacturing process, they argued, it becomes distorted, like the wave movement down the length of a whip after it is cracked.

Sales estimates and forecasting are usually done separately by retailers, manufacturers, and suppliers. When retailers notice a slight increase in demand for a specific product, they may order a little extra from the wholesaler just in case they've sensed a trend. The wholesaler gets the order, sees the uptick, and makes its own forecasts-which are blurrier than the retailers' because they aren't based on any real sales figures. Then, when a manufacturer tries to interpret orders coming from the wholesaler, the perceived increase in demand can become further exaggerated: the bullwhip effect.

This spring, "Information Distortion in a Supply Chain: The Bullwhip Effect" was named one of the 10 most influential papers published in Management Science, the journal of the Institute for Operations Research and the Management Sciences, during the past 50 years.

Authored by Lee, the Business School's Thoma Professor of Operations, Information, and Technology; Whang, the Jagdeep and Roshni Singh Professor of Operations, Information, and Technology; and V. "Paddy" Padmanabhan, now a professor at INSEAD, Singapore, the paper was published in Management Science in 1997 and is the most recent of the top 10 cited. The others all appeared more than 20 years ago.

Work by two other Business School faculty members was cited among the top 50 papers from the journal. The editors named "Investing in Reduced Setups in the EOQ Model," published in 1985 and authored by Evan Porteus, the Sanwa Bank, Limited, Professor of Management Science; and "A Simplified Model for Portfolio Analysis," by William F. Sharpe, the STANCO 25 Professor of Finance, Emeritus, published in 1963. Sharpe received the 1990 Nobel Memorial Prize in economics for his work in portfolio theory.

Alumni to Know

Faculty

Newsmakers

Accounting professor William Beaver this spring completed a clean sweep of the teaching awards presented by Business School students when he was honored by the PhD Student Association with its 2004 Distinguished Service Award.

In 1985 he received the MBA Distinguished Teaching Award, and in 1999 he was given the Sloan Teaching Excellence Award. The Joan E. Horngren Professor of Accounting, Beaver has been a part of the Business School faculty since 1969.

In other awards, assistant accounting professor Mark T. Soliman received the 2004 Distinguished Teaching Award presented by MBA students, and Peter DeMarzo, professor of finance, was honored by the 2004 Sloan class.
Students recognized Soliman for his "open door" accessibility, ability to communicate difficult concepts, eagerness to share his research, and sense of humor. "He pulled off a miracle 'rookie season,'" said one MBA student in nominating Soliman. "As a CPA who has taken dozens of accounting classes at top accounting programs, I can honestly say that he is the best accounting professor I've ever had. Ever."

"Peter did an outstanding job teaching us financial theory in a very practical way," said Sloan student Carlos Salinas in making the presentation to DeMarzo. "I am sure he spent many hours building the class materials and the Excel models to explain options theory and bond pricing."

Three new academic chairs at the Graduate School of Business will be filled for the first time this fall. Bringing the total number of endowed chairs at the School to 54, the newest chairs are the Adams Distinguished Professorship in Management III, to be held by Kenneth Singleton, and the Stanford Investors Professorship, to be held by John G. McDonald. In addition, the Thomas M. Siebel Professorship in Business Leadership was created in 1999 but had not been filled previously. Its first holder will be William Barnett.

Singleton, who directs the doctoral program, is a financial economist whose path-breaking work has involved economic analysis of dynamic asset pricing models. The Adams III chair is one of three created by the Adams Family Foundation, founded by Denise and Stephen Adams of Santa Barbara, California.

The Stanford Investors Professorship was created in McDonald's honor by a group of former students and close friends to recognize his 35 years of teaching at the Business School.

Barnett's field of research is organizational ecology—an area that studies the full range and diversity of corporations, through their birth, growth, transformation, and mortality. He developed a popular MBA elective in entrepreneurship.

At a recent dinner honoring the faculty, Dean Robert Joss announced that two faculty members had been named to endowed chairs for the first time. They are Madhav V. Rajan, an accounting professor who specializes in economics-based analysis of management accounting issues, and Steven Grenadier, a finance professor with an interest in real estate economics, finance, and development, and in the applications of option-pricing theory. In September, Grenadier becomes the William F. Sharpe Professor in Financial Economics, and Rajan, the Gregor G. Peterson Professor.

Two faculty members who previously held endowed chairs will have new titles. J. Michael Harrison was named to the Adams Distinguished Professor of Management I chair created in 2000, and Paul Pfleiderer was named the C.O.G. Miller Distinguished Professor of Finance.