Sunday Message: The Nobel Prize

At 2:15 a.m. on Monday, Bob Wilson and his wife Mary went across the street to tell their neighbor Paul Milgrom — who had turned off his phone that night — that he had won the Nobel Prize in Economic Sciences. Their interaction, captured on Paul’s security camera and shared on social media, has been viewed by hundreds of thousands of people around the world.

It was a welcome moment of happiness — for Paul and Bob, for Stanford, and for the GSB. It’s an opportunity to celebrate their achievements and contributions to the field of auctions and market design. It’s also an important reminder of how the GSB provides space for fundamental research and enables the translation of ideas into practice.

Bob Wilson joined the GSB faculty in 1964, and has established a remarkable legacy through his research, his teaching and advising, and his influence on economics. (For true geeks, you can see Bob’s academic lineage here and here.) He is the founder of what Dave Kreps has termed the “School of Economics as Engineering,” which one also might call it the “Stanford School” — the application of economics to solve real-world problems of market design, contract design, and organizational design.

Three of Bob’s GSB students — Al Roth, Bengt Holmström, and Paul Milgrom — have won the Nobel. Milgrom started as an MBA student at the GSB before shifting into the PhD program. Adding Oliver Williamson (MBA ’60), and faculty members Bill Sharpe, Myron Scholes, and Mike Spence, our GSB laureate count is eight.

Wilson and Milgrom were cited for their work in developing the theory of auctions, and their pioneering efforts to put this theory into practice. Many of the tools and ideas from their work are now common currency among economists, including influential work from collaborations with GSB colleagues Dave Kreps and John Roberts.

In the early 1990s, Wilson and Milgrom designed the first Federal Communications Commission auction to sell radio spectrum licenses to telecommunications firms — jump-starting the mobile telephone industry. They have gone on to design markets for electricity, fishing permits, diamonds, internet advertising, as well as continued auctions for spectrum licenses. Their students have taken the “economics as engineering” ethos into other areas: markets for emissions permits, school choice mechanisms, kidney donor exchanges, internet advertising, securities markets, and more.

In a virtual celebration on Monday, we heard about some of the qualities that have allowed Paul and Bob to be so successful as advisors and mentors, and to remain so productive as researchers. Their insight, generosity, and curiosity, and their infectious joy for ideas are exceptional. I consider myself fortunate to have benefited from both of them for many years. My PhD advisor, Bengt Holmström, still refers to Bob as his role model, and I have learned an extraordinary amount from Paul as a colleague and collaborator.

As a professional school, everyone understands that we have a dual mission of research and education. What is not always as evident is how they mutually reinforce one another. Being in a business school helped Wilson and Milgrom identify and wrestle with real-world problems, and how their ideas could provide solutions. It is no surprise that members of the “Stanford School” populate the faculties of the world’s leading business schools. In the other direction, students are brought into contact with the power of scientific thinking and the impact that new ideas can have on management and business practice. I believe the GSB, more so than any other business school, exemplifies this two-way reinforcement.

Congratulations again to Bob and Paul.

Jonathan Levin