Stanford Business magazine

From Washout Teacher to Classroom Star

By Michele Chandler

ROCK STAR PROFESSOR. That’s the tongue-in-cheek title some students have bestowed upon Yossi Feinberg, the associate professor of economics whose meaty research includes developing ways to discern experts from impostors, evaluating the role unawareness plays when people make decisions, and dissecting the real cause of the subprime mortgage meltdown. (Hint: It’s not simply Wall Street greed.)

A past winner of the MBA Distinguished Teaching Award, the unassuming professor bearing a wry wit and steady supply of rock music to punctuate his teaching points is consistently popular with students from a wide range of backgrounds. Sit in on one of Feinberg’s classes, and you’ll quickly see why. He might quote Warren Buffett on derivatives, talk about the Asian financial crisis of the late 1990s, or take a few dance steps as he plays “Welcome to the Jungle” by Guns N’ Roses to underscore a PowerPoint slide about how easily risky mortgage investments spun out of control.

At the start of a recent Lifelong Learning seminar about the cause of the subprime mortgage crisis that has decimated the u.s. financial markets, Feinberg instructed the roomful of seasoned Business School alums to raise a hand if their personal investments were down more than 5 percent. He then asked them to raise their other hand if their holdings were down by more than 15 percent. At that point, most attendees had both hands up.

“And now do this,” Feinberg urged, pressing his fingers to each side of his head and rubbing his temples, as if trying to soothe a massive headache. Laughter erupted. Feinberg grinned.

With his audience firmly hooked, Feinberg went on to tell the group that he’d examined the subprime crisis for more than a year, initially so he could include it in his Economics of Organization course for MBAs. “It’s like a great movie about a hideous crime that, when different people describe the crime, it is a completely different story every time,” Feinberg explained about his fascination with the topic. “It had all the features—of uncertainty, of incentives, of how people react to the wrong incentives, and of how controls deteriorate.”

“It’s sort of depressing,” he admitted, adding, “At least there is a grain of hope at the end, which I hope will be the bottom line.”

Using humor is just one approach Feinberg employs to draw his audience into his complicated economic topics, whether the people in the seats are MBA students, PhD candidates, or, as was the case last September, Business School alums like Tiffany Griego, MBA ’04.

While attending Stanford, Griego was in Feinberg’s Managerial Economics class; now she’s associate director of real estate for Stanford Real Estate. Several weeks after the subprime seminar, Griego was still sharing Feinberg’s insights about the crisis and resulting bailouts with her co-workers, family, and friends. “He has a way of distilling his points down, and they are rooted in his tremendous research and thoughtfulness,” Griego said about why she jumped at the chance to attend the event. Sitting in the class also transported Griego back to her days as an MBA student and led her to remember that “Yossi has that knack. He has a way of communicating that is not dry. He brought tangibility to the problem without sacrificing an intellectual analysis, and that’s what I appreciated about that evening.”

What did Feinberg say that struck Griego the most? Between financially risky new investment products, homeowners’ willingness to accept bigger mortgages than they could handle, and top executives who didn’t raise questions about fundamentals when their business was going gangbusters, “there were just too many players and too little accountability at each level,” Griego says. “For me, that was one big takeaway.”

But Feinberg also cautioned the group against blaming the meltdown solely on Wall Street greed. After all, he asked, what CEO would acknowledge to the board of directors that the company was making money hand over fist but should stop? “That CEO would be fired,” Griego said, adding that Feinberg told them rather than dismiss the industry’s actions as avarice, “we need to be aware that human nature drives us to succeed and, because of a lack of accountability, that led things to scale out of hand.”

The subprime upheaval isn’t Feinberg’s only area of expertise. He teaches MBA courses on Strategic Decision Making and Economics of Organization, as well as PhD courses. He is an ardent disciple of game theory, an arm of applied mathematics developed in the 1920s that seeks to explain conflict and cooperation using mathematical models; it’s now standard fare in most MBA programs. “Game theory is the technical way of describing economic interaction, but economics is the way of thinking about problems,” he explained. “What people want, what people will do based on what they want, and what information they have.”

Individuals frequently make decisions without all the answers and often settle on choices even if they don’t fully understand what the scope of the problem might be, Feinberg says. So, one of his main areas of research centers on how unawareness can affect bargaining.

As an example of how game theory plays out in real life, he presented the case of a shopper for a car who is asked by the salesperson whether he has email. If the customer is unaware that cars are sold online and he could use the internet to determine actual new car prices, that is a strategic lack of information the salesperson could exploit.

Explained Feinberg: “We can create a game that describes the process of bargaining and takes into account that the messages you send will actually change the game.”

The professor’s research also includes determining whether a person is a true expert, or simply someone who’s craftily figured out how to manipulate test results to make it appear that he’s in the know when actually he’s not. Along with Eddie Dekel-Tabak, an economist at Northwestern University, Feinberg is trying to develop tests that an authentic expert would nearly always pass and a pretender would nearly always fail and that could be applied to everything from financial to weather forecasting.

Feinberg grew up in a working-class family in Jerusalem with a father who held down two jobs and a mother who worked full time as a bank clerical employee. The family didn’t have a car until young Yossi was 9 years old.

His father, who did clerical work at a construction firm, sometimes brought home the company’s receivables for his 7-year-old math whiz son to calculate. “I’d sit down and would have to add up very long lists of numbers on balance sheets. I think I got paid for it,” Feinberg said.

Then, in high school, an exacting teacher further inspired his love of mathematics. On one of the teacher’s math tests, a score of 100 was perfect and usually the highest score in the class was 40, but pupils willing to go the extra mile could rack up 300 points. That mathematical treasure hunt piqued the interest of students, Feinberg said, because “there were secrets there that we all wanted to figure out, and that’s what made it challenging.”

Feinberg remembers his math teacher as being a little detached, not very communicative, and definitely not the buddy type. Still, the professor recalled, “He just loved the topic and when you love what you are doing, then it shows.”

After five years in the Israeli Army, Feinberg went on to receive his bachelor’s, master’s, and doctoral degrees in mathematics, all from Hebrew University of Jerusalem. He received his PhD in 1997 under the supervision of Robert Aumann, a game theorist who won the Nobel Prize in economics in 2005. In the late 1990s, Feinberg’s thesis examined how differing prior beliefs of decision makers can spill over into disagreement about current events.

Although he excelled in math—and also was intrigued by physics, computer science, and philosophy—Feinberg chose to specialize in economics. “I enjoyed math, but I didn’t want the abstract detachment,” he explained. “The idea that you can model people’s behavior and reasoning—that captured me. You can take mathematical equations and apply them to what people do. To me, that was the best of both worlds, something both practical and rigorous.”

He added: “A lot of people focus on how to share the pie and who gets a bigger piece. Sharing the pie is usually a socially and politically loaded question. But usually no one objects to just having a bigger pie. And, in many cases, it’s easy to do, once you have the economic tools.”

Feinberg came to the United States with his wife, biochemist Hadar Feinberg, and took a job as an assistant professor of economics at Kellogg Graduate School of Management in 1996 before joining Stanford’s Business School faculty in 1998. During his first year at Stanford, he was a self-proclaimed washout as a teacher. One student’s evaluation of his class read, “You are the worst teacher I’ve ever had,” Feinberg recalled with a wince, admitting that he did sometimes approach teaching as a chore. It took remembering lessons learned from his old PhD advisor to turn things around. “I realized that just like Aumann taught me, you need to figure out what the real problem is and try to solve it, not try to solve the most convenient problem.”

Feinberg determined he had to improve his classroom delivery before his students would ever embrace his economic insights. So he made refinements, adding humor and energy to the curriculum. And music, including everything from “You Never Give Me Your Money” by the Beatles to “Sugar, We’re Going Down” by pop punk band Fall Out Boy.

Music from Swedish pop group ABBA rang out frequently during one of Feinberg’s classes a few years ago. On the shelf beside his office computer is a poster featuring members of ABBA on the front and handwritten kudos from his MBA students on the back. “Your energy made economics great,” reads one entry. “Thanks for the most inspirational econ class ever,” another says.

“I can ask them to do anything now,” Feinberg said of his students. “They work hard. They invest many hours in trying to figure out difficult, technical things because at the end is the prize of having insight, having a powerful tool that wasn’t there before.”

Photos by Steve Gladfelter

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