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Category: Dartmouth

Published on Leave a comment on Bernie Marcus Comes to Town

On Friday, the Rockefeller Center was pleased to welcome Bernie Marcus, co-founder and former CEO of The Home Depot, as the Inaugural Portman Lecturer in the Spirit of Entrepreneurship. If we were to look across college campuses today and examine the list of people whom they invite to speak, I think that entrepreneurs would be the least well represented group relative to the contributions they make to society. And there really is no one who better exemplifies that than Bernie Marcus. He's the son of Russian immigrants, and a self-made man who has given back to his communities--primarily Atlanta, Jewish causes, and the medical field--many times over.

He viewed his contribution to the economy as making it possible for the United States to become a nation of "do-it-yourselfers" by putting everything they would need under one roof and doing so on a scale that would lower the prices they would have to pay. When asked (the presumably familiar) question of "What about your competition?", he gave a two part response. First, for the big box competitor, it was all-out warfare. Second, for the smaller hardware and other stores, he said that they shouldn't expect to survive if they couldn't adapt to provide a better or different service at a good value. He cited some examples of smaller stores that had done so.

Read the coverage of the event in the student newspaper.

Published on Leave a comment on In Memoriam, James O. Freedman

The Dartmouth community lost James O. Freedman, its President from 1987 to 1998, yesterday after a 12-year bout with non-Hodgkins lymphoma. The article in The Dartmouth characterizes his contribution to Dartmouth succinctly:

Freedman was a staunch advocate of intellectualism, ethnic diversity and gender parity at the College, while orchestrating an extremely successful capital campaign during the 1990s.

He was one of only a few presidents of the College who had no prior connection to it. But he managed to move it in a positive direction by, in the words of Sandy McCulloch '50, who was chairman of the College's board of trustees at the time Freedman was hired, "refocus[ing] on what we're in business for." It is a less ambitious agenda than that of a Summers or even a Hundert, who were hired to take their institutions in a new direction, but I am grateful for the effort, since it ultimately brought me to Dartmouth during that time.

Published on Leave a comment on Representative Artur Davis (D-AL)

Yesterday, the Rockefeller Center closed out its winter term public programs with a lecture by Artur Davis (D-AL). It was the second installment of our New Voices in Washington series, in which we bring emerging leaders from the Capitol to campus to interact with Dartmouth students. He spoke about the lack of progress that's been made on big issues over the last two decades and admonished the students to play an active role in overcoming that stalemate.

Congressman Davis represents the 7th District in Alabama, which includes Birmingham, Tuscaloosa, Selma, and much of the rest of central western Alabama. It will be interesting to see whether he can eventually win a statewide election, whether for governor or senator, from his home state.

Read the coverage in The Dartmouth here.

Published on Leave a comment on Visual Stylometry

Now this is problem-solving of the finest order. The current issue of Wired contains a fascinating article on the work of Dartmouth College professor of mathematics, Dan Rockmore. In a nutshell, he's using mathematical algorithms and plenty of computer power to help authenticate works of art where the artist's identity cannot be documented with certainty by other means.

Rockmore begins his procedure by analyzing the digital image pixel by pixel and creating statistical summaries of each painting or drawing. These summaries capture what Rockmore calls the artist's mathematical signature, which in theory will be consistent from painting to painting. Just as everyone's handwriting is unique - with characteristic letter spacing, slant, and design - so is everyone's painting style, with characteristic brushstroke direction, thickness, and length.

At least that's what the software showed with the Bruegels. When the mathematical signatures of the 13 drawings were mapped, eight works clustered together - the same eight deemed by experts to be authentic Bruegels. The other five were scattered in space. The clarity of the results startled the art world, and holds out the promise that Rockmore will be able to work backward from his current analysis to figure out exactly what makes a Rembrandt real: perhaps the master had thicker brushstrokes than his pupils, or some characteristic shake in his hand.

The article has an economic angle to it. The process is much like what applied economists do with nonexperimental data--try to achieve identification by examining the patterns in data. The process also reminded me of the part of Freakonomics where Levitt diagnoses teacher cheating based on observed patterns in students' test answers. But here, the stakes are even bigger. Consider that:

"The fact that you can put everything on the computer means that everything is numbers," Rockmore says. "As soon as everything is numbers, it makes perfect sense to ask mathematical questions about what the numbers represent." If he's right - if computers can distinguish between artists more accurately than connoisseurs can - the art world is in for some high-stakes corrections. Rockmore's scientific approach will boost the value of some collections by millions of dollars - while devastating others that are tainted by imitations and fakes.

Simply fascinating. Take a break from budget woes and enjoy the article.

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Published on Leave a comment on Dartmouth Divests, Sort Of

From this morning's press release, in the wake of a Board of Trustees meeting over the weekend (with my emphasis) added:

Based on recommendations by the board's Investment Committee and the College's Advisory Committee on Investor Responsibility (ACIR), the trustees voted to direct the College's Investment Office to avoid investments in six companies deemed to be directly complicit in what the U.S. Congress and Department of State have determined to be genocide in the Darfur region of Sudan. As a result, Dartmouth will avoid investing in ABB Ltd.; Greater Nile Petroleum Operating Company, Ltd.; PetroChina Company, Ltd.; Sudanese White Nile Petroleum Company; Petroliam Nasional Bhd (Petronas); and Sinopec Corp., all of which are involved in oil drilling or oilfield services in Sudan. The College does not currently hold stock in any of these companies.

"Divestment and screening are steps that should be taken infrequently and only in the most compelling circumstances," President James Wright said. "This decision reflects Dartmouth's concern about the Sudanese government's campaign of atrocities against civilians, which Congress and the State Department have described as genocide. This campaign has created a humanitarian crisis of major proportions in Darfur and Chad."

Board Chair William H. Neukom thanked the ACIR and the students involved in the Darfur Action Group for bringing the issue to the board's attention, and for their work in researching and analyzing the Darfur crisis and the activities of companies doing business in Sudan. Neukom said the board encouraged the administration to support additional educational programs concerning the Darfur situation.

So divestment apparently didn't require the College to actually sell a stock. That may be a first, but it does abide by the claim I made in an earlier post: for divestment to have any impact through the capital markets, it has to focus on new rather than old capital. In that post, I also suggested that the critical element in using markets to punish the offenders is to work through the product markets--to boycott the products rather than merely ownership of the assets.

It will be interesting to see where the divestment movement on campus goes from here.

See also the article in today's Dartmouth and some comments over at Joe's Dartblog.

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Published on Leave a comment on In Praise of Nathaniel Fick

Our honored guest this evening was more impressive than I could have imagined, particularly in his willingness to answer direct questions with honest and thoughtful answers. Here is how I introduced him:

The name Nathaniel is derived from the Hebrew phrase, “Gift of God,” and Captain Fick’s presence here on Veteran’s Day reminds us that we should be thankful for the members of our nation’s and our allies’ armed forces who have stood as the front line in the defense of liberty around the world. Many of them have been buried not far from where they made that stand.

Captain Fick served tours in both Afghanistan and Iraq, in the latter leading a platoon of an elite Recon Battalion that was at times the northernmost one in the march toward Baghdad. He is now enrolled in a dual-degree program at Harvard’s Business School and Kennedy School of Government. Tonight, he joins us to speak about “Eating Soup with a Knife: A Marine Officer's Perspective on Afghanistan and Iraq.”

It was First Lady Eleanor Roosevelt who made an observation sixty years ago that has become part of the Marine Corps lore. She said:

The Marines I have seen around the world have the cleanest bodies, the filthiest minds, the highest morale and the lowest morals of any group of animals I have
ever seen. Thank GOD for the United States Marine Corps!

Even a quick glance at the role of the military in American society shows that the life of an American soldier is full of contradictions. There is no easy way to reconcile the world’s most lethal military force with the world’s most open society. But the two are inextricably linked. The more representative is the democracy and the freer is the republic, the more it is worth fighting for.

We can do our best to bridge this gap by hearing the stories from the veterans themselves, and although some experiences are off limits, old soldiers do like to tell of their adventures. As a result, the list of fascinating books about military campaigns is long. It has just gotten one book longer and a whole generation better. I believe that Captain Fick’s One Bullet Away: The Making of a Marine Officer is destined to be the classic military memoir for our times.

What do we learn from Captain Fick’s treatise? We see example upon example of how American soldiers use force deliberately rather than indiscriminately. We come to realize that operational mistakes in war are inevitable, but when they occur, Marines on the ground have been trained to overcome them. And we feel reassured that having a Dartmouth classics major at the helm of an elite platoon in Iraq makes for not just a great read, but it helps get the mission accomplished and keep the troops alive.

We are grateful to Captain Fick for being with us today to share the insights he has gained from his unique experiences. Earlier today, he had lunch with the Rockefeller Center’s PoliTalk discussion group and students in the Dickey Center’s War and Peace Studies program. He met with some of Dartmouth’s ROTC cadets. Tonight, he will lead a session of the Rockefeller Center’s Leadership Fellows program. It’s not quite a day of training at Quantico, but it is more than enough to show Nate’s affection for his alma mater.

Ladies and Gentlemen, please welcome Captain Nathaniel Fick.

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Published on Leave a comment on Some Economics of Divestment

Much has been made about divestment of Dartmouth's endowment from companies that do business in the Sudan. I applaud the sentiment, but I think the arguments overstate the case for what divestment by itself is likely to accomplish.

Here's an example from The Dartmouth's editorial board from last spring:

Dartmouth's investments in Siemens and Alcatel, both of which hold government contracts and are categorized by the Darfur Action Group as being tacitly complicit with the genocide, present a cause for concern. Though the Advisory Committee on Investor Responsibility is not prepared to recommend divestment in these companies for lack of information, we recommend that it obtain the needed information as quickly as possible. This issue should be a pressing concern for every human being. In particular, ACIR needs to consult the Conflict Securities Advisory Group, which specializes in these situations. Should CSAG provide evidence that Dartmouth's endowment in any way facilitates the genocide, Dartmouth must divest immediately.

The last sentence makes the ethical point quite well, and I couldn't agree more with the recommended course of action. Two paragraphs later, the editorial continues:

Dartmouth's divestment, moreover, could have a ripple effect upon the financial decisions made by similar institutions. A wave of divestment would put pressure on the Sudanese government to take action to end the genocide and would deprive the Janjaweed rebels of much-needed funds. Moreover, according to the report submitted by the DAG to ACIR, the companies in which the College invests restrict most of their activities to Khartoum and provide non-essential services, thus ensuring that divestment would not harm those it is meant to help.

This paragraph confuses old and new capital, to the detriment of its argument. Once a share of stock is issued, then who collects the cash flows due to ownership is largely irrelevant to the operations of the company. I don't believe that the sentence that I highlighted in red, particularly the part about depriving the rebels of funds, is true. Consider the following simple example:

Suppose that, based on the projected cash flows from selling its products, the company in question is worth $100 per share. Now imagine that a large group of current shareholders decide that they are going to divest the stock. What happens to the stock price? Let's say they are very successful, and it goes down to $80. Since the business operations of the company have not changed, the future cash flows of the company still have a present value of $100 per share. All that the divestment has done is to open up a $20 per share profit opportunity for a new investor in the company. The most natural candidates to see the opportunity and take advantage of it are the existing management or the remaining (less ethical?) shareholders.

Continuing to focus on the capital markets, the way to damage the company is to deny it access to new capital, not to spend a lot of time debating who should own the shares on the existing capital. The $80 share price would matter, for example, if the company intended to issue new equity and had to take a 20% capital loss on all new shares. But very few companies issue new shares in a given year, and for well capitalized multinationals, there are other financing options that don't even require the equity market. So I am very doubtful that the capital market can be used productively in this endeavor, contrary to the conjectures of the editorial. (Similar conjectures are made in a well intentioned op-ed yesterday.)

Moving beyond the capital market, the way to get the company's attention is to boycott its products, which does change its business model because it lowers the future cash flows that support the $100 per share price. That's real pain to existing capital owners. And it would involve real sacrifice to those advocating for reform--doing without some products that they would otherwise consume, rather than engaging in fair-market value transactions and excluding a few companies out of several thousand from their portfolios. But that is to be expected if you intend to be an activist for positive change.

So whenever I hear of calls to divest, I think that the emphasis has been misplaced, and what is really needed is a boycott. But, of course, if you are planning to launch a boycott, the prudent investment strategy is to divest first.

Hat tip to Joe's Dartblog for bringing this issue to my attention.

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Published on Leave a comment on Congress Shall Make No Law

Last evening, as part of first-year orientation week at Dartmouth, I gave a public lecture on the Constitution with the title, "Congress Shall Make No Law." I am not an expert on the Constitution per se, but I enjoyed the opportunity to meet some new students and discuss the ways that Constitutional principles are relevant to their time at Dartmouth. Slides from the presentation are here.

Some teasers:

  1. You could be forgiven if you thought that “Congress Shall Make No Law” was a mission statement.
  2. There are 297 million Americans and there are 435 Representatives, or 680,000 Americans per Representative. How is that anything but an anonymous relationship with the typical citizen?
  3. (Virtually) nothing gets done when your voice, no matter how divinely inspired, is in the distance or isolated. Turn Vox into Voces if you want to restore the civic health in your society.

The students had two interesting reactions to my remarks. First, they were deeply suspicious of conventional media outlets, reacting to what they perceive as consolidation and corporate interests in the industry. Second, they showed a great unease with institutions that are part of the executive branch but that may function as policeman, prosecutor, and jury--the SEC, the FCC, and the IRS, for example.

The lecture was Dartmouth's formal observance of Constitution Day, a reference explained in more detail in the presentation and in the coverage of the event in The Dartmouth.

It was a good event, but it wasn't even close to being the best speech on campus yesterday.

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Published on Leave a comment on Score Two for the Home Team

From today's Wall Street Journal, the President makes two excellent selections:

Bush to Appoint TwoTo Economic Council
By a WALL STREET JOURNAL Staff Reporter
July 27, 2005; Page A4

WASHINGTON -- President Bush plans to appoint two Dartmouth College economists to the White House Council of Economic Advisers, people familiar with the matter said.

The nominations of Katherine Baicker and Matthew Slaughter are expected this summer, these people said. Ms. Baicker, Mr. Slaughter and a White House spokeswoman all declined to comment.

Ms. Baicker, 34 years old, has been on the Dartmouth faculty since 1998 and served on the council's staff during President Bush's first term. She specializes in health economics and fiscal relations between the federal and state governments.

Mr. Slaughter, 36, has been a business professor at Dartmouth since 2002, specializing in globalization and the behavior of multinational firms. [Ed. Slaughter has been at Dartmouth since 1994, first in the economics department and then, since 2002, at the Tuck School of Business.]

The Council of Economic Advisers advises the White House on a range of economic topics. Ms. Baicker and Mr. Slaughter are to fill spots vacated by Harvey Rosen of Princeton University and Kristin Forbes of the Massachusetts Institute of Technology. The council's only member currently is chairman Ben Bernanke.

Globalization and health care--just the expertise the CEA will need for the next two years. Best of luck to both of them.

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Published on Leave a comment on Words Fail Me

This is just too sad to believe.

Willis-Starbuck '07 murdered in off-campus shooting

Sophomore killed early Sunday morning
By Kevin Garland, The Dartmouth Senior Staff
Published on Tuesday, July 19, 2005

While away from the Dartmouth campus for an internship, Meleia Willis-Starbuck '07 was shot and killed early Sunday morning near her apartment on College Avenue in Berkeley, Ca. The incident occurred just before 1:46 a.m. Sunday, less than four blocks south of the University of California at Berkeley campus.

Read the full story here.

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