Adam Galambos

Author: Adam Galambos

If you can’t beat ’em, join ’em

The Wisconsin State Journal reports:

Inside the elevator that ascends six floors in the UW-Madison Humanities Building to reach the university’s art department, the aesthetics had sunk low, really low.

Over the years the metal walls of the bare-bones, slightly rumbly elevator served as a magnet for 2D creativity, some of it intriguing, but a lot of it slapdash and much of it resembling graffiti more often found on the sides of a bathroom stall. In other words, the kind of vandalism someone can pull off between stops on a 20-second elevator ride.

My feeling is that this was simply art students practicing their elevator pitch. In a city that already has Connected Bits service, you simply would have used your smartphone to take a quick pic of the graffiti and send it on to the authorities. By the way, the person behind Connected Bits (and other very intriguing ventures) is Dave Mitchell, who is a Lawrence alum and will be guest speaker for In Pursuit of Innovation (Econ 211) next term. But, in Madison, they took a tip from the pop-up gallery movement instead, and turned that doomed “lift” into the Hi/Lo Gallery, “seven floors of visual candy.” Appleton is likely soon to get its first pop-up gallery, thanks to Sydney Pertl and Krissy Rhyme , who have been continuing the project from Entrepreneurship in the Arts and Society, and hope to open the first exhibition in February.

[HT to Inside Higher Ed]

Will NYC prosper?

The answer depends on whether it manages to preserve its history of entrepreneurship, says Edward Glaeser in his piece Start-Up City in New York’s City Journal. He argues that the strength behind the spectacular economic development New York City has experienced in most of the past two hundred years grew out of entrepreneurship. Industries have come and gone, but the entrepreneurial spirit remained. But will this be the case after the Fall of Finance? Glaeser worries that the financial firms that have come to dominate the City aren’t small and entrepreneurial, but relatively large, possibly undermining that culture of entrepreneurship. Moreover, in several studies and surveys New York state and New York City show up as one of the worst places to do business in the US. One other piece of this picture that I think deserves more attention than Glaeser is granting is the constant influx of immigrants that New York has experienced for a long time. See this paper by Waldinger on immigrants and the famous New York garment industry, or this study by the Kauffman Foundation on immigration and technology entrepreneurs in particular. Of course when great numbers of immigrants became entrepreneurs in NYC, it was in small-scale manufacturing industries such as the garment industry, where no knowledge of English and no higher education were required. My great-uncle has several childhood friends who successfully became such entrepreneurs in the US, and spoke rather limited English to the day they died. It is doubtful that such a mechanism of low-skilled immigrant entrepreneurship could function today. But, as the aforementioned study suggests, technology may be the new garment industry.

Grand Challenges in Economics Research

The National Science Foundation solicited the views of a number of leading (?) economists on what the grand challenges of economic science are for the next decade. Some of the responses are available here–you may not understand much of what these white papers are about without serious background in economics, but I still encourage you to take a look and see where the hottest stuff in economics might be when you are in grad school, if you choose that route. After a quick glance, it does seem to me that many of these white papers are about the authors advancing their agendas rather than visionary perspectives that live up to the “grand” in the challenge. These are certainly no Hilbert’s ten problems for economics. Another thing that occurred to me: of the fifty or so authors of these white papers, only three or four are women. Therein lies another grand challenge for economics, I think.

[HT to Noam Nisan at the Algorithmic Game Theory Blog]

EntrepreneurTheArts

Another very interesting person I heard at the CEO conference on Friday was Lisa Canning. Well-known for Entrepreneurthearts.com, Lisa Canning is a prominent face of arts entrepreneurship these days.

Lisa Canning with her baby at CEO

She founded the Institute for Arts Entrepreneurship, which has a two-year post-graduate certificate program that could be of interest to many Lawrentians. Their mission: “The IAE is committed to helping our students discover meaningful solutions to one essential question: As a person committed to the arts, how do I develop the knowledge and skills to create a successful, meaningful and sustainable life in today’s world?” Ms. Canning has started six highly successful ventures in the past twenty-some years. She sold all of them to start the Institute for Arts Entrepreneurship, except one: the one that is about her “baby,” the instrument she has played since her childhood, the clarinet. Lisa’s Clarinet Shop is still helping musicians of all levels find the perfect clarinet. Even when she was running those earlier businesses, Lisa hired artists and helped them build on their artistic skills and develop entrepreneurial skills. Artists can use their empathy and ability to connect with people to become successful entrepreneurs. Rather than pitching the “what” to a customer, it is much more important to make a human connection around the “why” and the “how.” This is good advice to anyone–Gary Vaughan was telling me on the way home that in any business, people buy from you because they like you. As Lisa said, she never has to talk about price, because it becomes a secondary issue to the customer. She is certainly a very kind and very emotional person, and I believe that she can teach a lot to artists about “entrepreneuring their art.” I hope we can get her to Lawrence in the not-so-distant future.

Collegiate Entrepreneurs’ Organization conference

Gary Vaughan and I spent the last two days at the Collegiate Entrepreneurs’ Organization (CEO) conference in Chicago. The conference is largely sponsored by the Coleman Foundation, who also made our Entrepreneurship in the Arts course possible through a grant, and who continue to fund some of our arts entrepreneurship initiatives. Our own Alex Chee and Cuong D. Nguyen are still at the conference.

This three-day event features a number of entrepreneurs who share their experiences with about 1500 students from all over the country. We heard, among others, Jimmy John talk about his story. (His father lent him $25K to start a hot-dog stand, and said that if he makes it, Jimmy gets 52% of the company, father gets 48%; if he fails, he agrees to enlist. The threat of boot camp pushed Jimmy to succeed and buy out his father. How did he sell his first sandwiches? Well, he didn’t. After he opened his shop and not a soul showed up by 2pm, he grabbed a few sandwiches and went to the neighboring businesses to hand them out as samples.) Another interesting person I heard was Phillip Leslie. Formerly a Microsoft software engineer (mobiles apps division), Mr. Leslie just couldn’t help getting into the iPhone app gold rush when he was an MBA student at Chicago’s Booth School of Business. So he launched ProOnGo, a mobile expense reporting app. In the middle ages, when you went on a business trip, you came home with a pocketful of receipts, which you then meticulously recorded and submitted. With ProOnGo, when you get that receipt, you take a pic of it with your iPhone, or Blackberry, or whatever, and in a few seconds you are done. At the end of the trip, you click to submit your expenses in excel or pdf format. Huge hit. Mr. Leslie gave very good advice indeed on how to make it with an app. For example, do you know the three ways to make money with an app? Through ads, one-time sales, or subscription service. Sounds obvious, but, actually, he is one of the pioneers of the last of these: it was believed that subscription service just wouldn’t be viable for iPhone apps. And how much do you get per impression if you advertise on your free app? Well, between a tenth of a penny and a penny. He also encouraged students with economics and social science-type skills to pair up with computer science majors to produce an app. But be clear about one thing: is this a hobby (which will cost you money), or a business (which should make you money)?


Lawrence Scholars in Business Lame-a-rick

The LSB program burst on this year’s scene in the form of the Alternative Investments Summit on Sunday. (Here is the announcement.) I saw many new faces, which is great: students discovering the program. I know that students always learn a lot from these events. (Proof by Introspection: I myself always learn a lot from these events. Therefore, so do students. Q.E.D.) I enjoyed hearing from Messrs. Spaeth, Allweiss and Perille, who said that Private Equity people simply have more fun. Anyway, my quick summary:

Your liberal learning has gravity,
Match it with years in an industry,
Get credit training
(It isn’t too draining)
You’re ready to try private equity.

The case studies always add an element to this event that infuses it with that real-life excitement that I wish more of my classes had. As often in the past, Mr. Perille put his money where his mouth was, and offered up a small percentage of the proceeds of his latest deal for the best team in the room. After over an hour of reading and vibrant discussion, each team had to take the stage in turns. The winning team: Aimen, Minh, Ranga, Regina, Vishvesh. They showed us quick and smart analysis, presented cogently. The judges, Sandy and Kirk Ryan ’83 were visibly impressed. Their classmate, Jonathan Bauer ’83 is leading the next Summit, on Management Consulting–coming up on January 15th. That one’s always a riot, featuring–again–some hands-on case study work. No $100 prize in the past, though. That does give you a hint about one difference between consulting and private equity.

Entrepreneurship and the Liberal Arts

I spent the day yesterday at Beloit College, where the 2010 Miller Upton Forum is under way.

Highway 26
The frozen chickens add a surrealist touch

The weather was not ideal for driving across Wisconsin, but the unusual conditions produced some amazing scenery.Before the Forum began, I had a chance to catch up with a friend, Daniel Barolsky, who was a Postdoctoral Fellow at Lawrence during the first year of the Fellows program. We all know that the first crop of Fellows was the best. I came in the second year of the program as a Fellow, so Daniel and I overlapped two years at LU. Anyway, we sat down in the Bushel and Peck’s, which is the center of activity in Beloit. It is a very interesting place–they have gourmet groceries, coffee, food, and ambience conducive to conversation. If you go, do stick to American coffee–that’s definitely their forte. If you get their bottomless cup, you will end up going through the art gallery in the back, which leads to the restroom. Oh, and the frozen chickens are stored back there, too.

The Forum itself started with a panel on Entrepreneurship and the Liberal Arts. Our own Prof. Finkler presented as part of a distinguished panel, describing the great many things we do in the name of I&E at Lawrence. He started with an image of the “Creative Instruction” cup that I presented to Prof. Gerard to signify his Chief of Schumptoberfest title. Prof. Finkler then summarized Schumptoberfest, In Pursuit of Innovation, Entrepreneurship and Finance, Entrepreneurship in the Arts and Society, and the many ways we build innovation and entrepreneurship into our courses at LU (including the upcoming Economics of Innovation course–watch this space for updates!) He also talked about the center we are developing, the Lawrence Innovation Bridge, where student ventures will have a space to grow. Robyne Hart from the ACM’s Chicago BES program also presented, outlining the indisputable advantages of being in Chicago, a hub of innovation and entrepreneurship. Consider making that a part of your Lawrence experience. From Wake Forest University, Betsy Gatewood presented on education, entrepreneurship and the liberal arts. She should know, being the Director of their Office of Entrepreneurship and Liberal Arts. They have an astounding variety of courses in all disciplines that relate to Entrepreneurship–take a look and let everyone at Lawrence know that you’d like to see more of that stuff here, too. Finally, Beloit’s own Jerry Gustafson gave an eloquent, entertaining, erudite, evocative and overall excellent monologue on entrepreneurship and education. We’ll see if we can make that available to you somehow. Finally Israel Kirzner himself reacted to what had been said. He thanked the panelists for all he had learned from their talks, pointing out that much of it was “refreshingly new” to him. Then he went on to make a distinction between studying the role of entrepreneurs in the economy (what he has done) and studying entrepreneurship, what makes an entrepreneur, etc.

The panel on Kirzner, incl. Kirzner

Prof. Kirzner reiterated that distinction in the evening panel discussion on his work. The participants were (from left to right in the pic) Roger Koppl, Deirdre McCloskey, Virgil Storr, and Israel Kirzner. Much was said about expertise, entrepreneurship, piracy and shipwrecking, but to me the most interesting comments came from McCloskey, who started by describing, in the way of a confessional, here transformation from Chicago-school Samuelsonian anti-entrepreneurship economist to a fan of Kirzner. Max U, the protagonist of price theory, is a sociopath, says McCloskey, and we need a much better model of Human Action than that. Of course she has done much to round out our view of human action in her several books, the most recent of which is Bourgeois Dignity: Why Economics Can’t Explain the Modern World . She went on to reiterate the argument that some of us know from Schumptoberfest: Samuelsonian equilibrium economics has no place for the entrepreneur, because equilibrium looks at what happens after the entrepreneur’s work is done. As Jerry Gustafson put it, “by the time the theorist arrives on the scene, the entrepreneur has vanished.” There was much talk about what exactly Kirzner meant by “alertness.” He himself put it as “knowing what is around the corner,” and reminded us that by definition it cannot be taught. Apparently that comment (it is not possible to teach entrepreneurship) was made to him by Baumol many years ago. In response, Jerry Gustafson and others made the argument that neither is it possible to teach someone how to be a virtuoso violinist or pianist–but it certainly is possible to enhance one’s innate abilities in those areas. So it is with entrepreneurship: the true entrepreneur is born, not made, but we can certainly enhance those aptitudes through education. Perhaps more importantly, having entrepreneurship programs opens students’ minds (alerts them to) to the possibility of pursuing an entrepreneurial life. Gustafson added that having an entrepreneurship center like CELEB gives students an opportunity to try their hand at entrepreneurship in a safe place, where failure is not catastrophic and there is friendly help that makes starting a venture a learning experience. Our own dreams of the Lawrence Innovation Bridge go along these lines, too.

If you have any questions or comments about any of this stuff, click below and comment, or talk to us.

First LSB event of the year!

The LSB season opens this year with the Alternative Investments and hedge funds event, this coming Sunday. Bob Perille himself is leading this one, and it’s promising to live up to the high standards we have come to expect from him and his colleagues. This year’s event will be different from last year’s, however, so come even if you attended last year. Jason Spaeth is skype-ing in, participating as an LSB panelist for the first time, and he is going to be introducing the industry. Another good reason to come is the actual, real-life, taken-from-the-trenches (or tranches?) offering memoranda that Mr. Perille always brings. You get to work on those in teams, and, in the past, Mr. Perille has offered a prize of $100 for the team with the best presentation on their “mini case study.” So don’t miss your chance to learn something interesting about the world you live in–whether you want to become a private equity whiz or not.

Nobel prize

Though this year’s winners of the Bank of Sweden’s prize in memory of Alfred Nobel may not have been on the radar screens of many, at least two of the three were predicted by a very prominent group of economists. As reported on the Cheap Talk blog,

Northwestern Econ and Kellogg Nobel predictions

Northwestern’s economists and those in several departments at the neighboring Kellogg School of Management put Dale Mortensen as their top prediction, with Peter Diamond in third place. Well, perhaps I should mention that Dale Mortensen is at Northwestern… Anyways, Jean Tirole was also highly favored, really by everyone except the Nobel committee. The only rational conclusion can be that the Nobel committee has good reasons to believe that Monsieur Tirole will have a long life. Though he did not get the Nobel (again) this year, he should be able to use this to get a lower life insurance rate. Anyways, take a look at Jeff Ely’s “live blogging” of the Nobel at Cheap Talk. By the way, In spite of 12 faculty members in the relevant disciplines believing that Mortensen was getting the big prize, apparently this news caught the Northwestern PR people by surprise, too. Almost three hours after the prize was announced, the top news on the Northwestern homepage is still the refurbishing of Evans House:

Swoopo

Auctions have been around for many centuries, and those who have had some game theory know that there are many kinds. In some, you outbid others by offering more and more for the object being auctioned, in some the auction clock starts with a high price and descends until someone (the winner) yells “stop!” Most auctions have the winner pay the last bid, though some have the winner AND the next highest bidder pay, or even have every participant pay (all-pay auctions). I came across a newly popular type of auction that has been attracting quite a bit of attention. In a pay-per-bid auction, such as swoopo, your every bid increases the price by a set increment (such as one cent), but every bid costs you 60 cents. Some websites claim that these auctions are rip-offs, some advertise the great deals (and iPad for $11, a gold bar for $5, etc.). It’s fascinating to take a look at recently ended auctions on swoopo: here is someone paying $787 ($727 in bids and $60 in the final price) for a smart phone that swoopo says costs $620 and you can get for probably $100 less than that elsewhere. On the face of it, this looks like a large-scale and real-life variant of the dollar auction. What complicates this calculation is that one can bid on “bid packs” on swoopo, so the person winning that phone may have used bids that in fact cost him much less than the face value of those bids. There are only a few academic papers analyzing this new craze. For some interesting theory as well as empirical analysis, take a look at this paper. So how can it be profitable to sell a $100 Visa gift card for $1.98 to someone who used just 96 bids and thus got $100 for $60? Well, for the price to get to $1.98, 198 bids had to be placed. Ignoring the aforementioned possibility to buy bids at a discount, those 198 bids mean an income of 198x$0.60=$118.80. According to the paper cited above, the profit margins for swoopo are astounding.

Summer reading

My summer reading list will definitely include The Devil in the White City, by Erik Larson. It is the story of two men, one who headed the design and the construction of the 1893 World’s Columbian Exhibition, famed Chicago architect Daniel Burnham, and one who

murdered a dozen or so of the visitors to that once-in-a-century sensation. The book is completely fact-based, and paints a vivid picture of end-of-century Chicago. The exhibition was Columbian because it commemorated the 400th anniversary of Columbus’s “discovery” of America. It had to be better than the 1889 world fair in France, which gave them the Eiffel tower. Of course, little did they know that the 1896 World Fair in Budapest would trump them all. (That was to commemorate the 1000th anniversary of the Magyar hordes invading the Carpathian basin. Though important to Hungarians, it was not  even in the same ballpark as Chicago’s.)

Star-power at Lawrence this Saturday

AC10-119 LSB Entertainment Industry Summit Poster
Click to Enlarge

This Saturday the Lawrence Scholars in Business program will have its final event of the year: the Entertainment Summit. This event should be of interest not only to economics and other majors who are interested in the business of show-biz, but also to Conservatory and Arts students interested in getting into the entertainment world.

Five Lawrentians who know that world very well will be here to tell us about it: Alan Berger, Emeline Davis, Lee Shallat Chemel, Liz Cole, and Campbell Scott. Take a moment to click on those links, and marvel at the star-power arriving to campus on Saturday. Campbell Scott will be showing his new mockumentary, Company Retreat, at 7:15 pm on Friday, May 21st, in the Warch Cinema.

Please sign up in the Career Center, or by email at careercenter@lawrence.edu.

Monkey business

In Introductory Microeconomics, we have been discussing trade. We all know that Adam Smith wrote that trade was a result of people’s “propensity to truck, barter, and exchange one thing for another.” But did you know that he also wrote “Nobody ever saw a dog make a fair and deliberate exchange of one bone for another with another dog. Nobody ever saw one animal by its gestures and natural cries signify to another, this is mine, that yours; I am willing to give this for that.” (Wealth of Nations, Book I, Chapter II) This video calls all of that into question, it would seem (thanks to Adam King). On a related note, listen to this podcast from NPR to get an interesting perspective on early trade (thanks to Max Randolph).

Learn, learn, learn…

…said the great Lenin—at least that is what we all heard in Soviet countries.

I couldn’t find the source of the quote, but it is written in giant letters on buildings, carved into stone in numerous places in the former USSR, so it must be true. Well, the great Lenin was born exactly 140 years ago, on April 22 1870, as Vladimir Ilyich Ulyanov. Happy Birthday, Comrade! The living room window of the apartment where I spent much of my childhood faced the Lenin statue you see on the right. I am sure in a drawer back home there is a black-and-white photo of 10-year-old me bicycling around it… You can’t tell from this picture, but the statue is 4 meters tall.

Lenin, on the other hand, was rather short, but extremely persuasive, as this video will no doubt convince you. He came back from his exile in Switzerland just in time to lead the October Revolution.

LeninHe wrote a lot, including some quotable bits such as “Where the bourgeois economists saw a relation between things (the exchange of one commodity for another) Marx revealed a relation between people.” He died after a stroke, which was confirmed in this study of his brain.

I could say a lot more, but I’d better get back to my five-year plan.

Steven Strogatz explains calculus

OK, this may not be all you need to satisfy the calculus prerequisite for Micro Theory, but Steven Strogatz’s columns on mathematics are always fun and educational. In this most recent one he explains how calculus is “change we can believe in,” relating to hiking in the snow, Michael Jordan’s jumps, and the short days of winter.

This week’s SpecialTea: Fresh Ideas in Innovation

Our weekly EconTeaBA will get an intellectual boost from physicist and in-house innovation expert Professor Brandenberger on Monday. As this post noted a few days ago, he recharged and refreshed his thinking on innovation at a conference in Berkeley, where the world’s top thinkers on innovation gathered two weeks ago. The conference was organized by The Economist, and the list of speakers included Amar Bhidé, Robert Reich, Clayton Christensen, David Kelley, Michael Porter, Jared Diamond, Ray Kurzweil… and the list goes on. Professor Brandenberger will tell us about what these great minds had to say about the future, about innovation, and how that has changed his views on the subject. And there will be cookies, tea, coffee.

Lawrence Scholars in Business Chicago trip

The LSB program sponsors an educational trip to Chicago every year. The purpose of the trip is to provide students an “immersion experience” in one of the country’s financial centers. The trip will take place during reading period, on May 6th and 7th. We will leave at 6:00 am on Thursday, May 6th, and return in the evening on Friday. We will have a full schedule, visiting the Chicago Board of Trade, the Federal Reserve Bank, as well as some firms including Madison Dearborn, Copia Capital, the consulting firm Deloitte and Touche, and The Northern Trust Bank. The costs of the trip are covered by the LSB program. This trip is a great opportunity to learn about the financial world (and a consulting firm) up-close, in a way that you couldn’t do on your own.

If you would like to join, sign up by giving Adam Galambos an envelope with $20 in it, and your name on it. We will return the money to you when you board the bus at 5:45 am on May 6th. Should there be more students interested in going than spaces, preference will be given to students who did not go on the trip last year and to juniors and seniors, as they are less likely to have another chance to go. But, if you are interested in the business world, sign up, whoever you are—if you don’t get to go, we’ll return your deposit, of course. The deadline for signing up is April 12th. Email Adam Galambos with questions.

Alternative Investments Summit

Join us this Saturday, 3:30, the Hurvis room, to learn about private equity and other kinds of alternative investments. The session will be led by Bob Perille ’80, Managing Director at Shamrock Capital, the private equity firm started by Roy Disney, Walt Disney’s nephew. Alan Allweiss ’77, Managing Director at LBC Credit Partners, Dan Howell ’74, Senior Managing Director, Mesirow Financial, and Bryan Torcivia ’81, mergers and acquisitions consultant (BAT Consulting) will join Mr. Perille in explaining alternative investments and what’s wrong with hedge funds.

Mr. Perille will bring offering memoranda (an offering memorandum is a document explaining the details of an investment to potential investors), and student teams will have to decide whether to buy the firm or not, and for how much.

Last year there was a substantial prize!

Sign up in the career center or at careercenter@lawrence.edu.