The Economic Payoff of Early Childhood Intervention

By Laura D’Andrea Tyson
We all know, or at least we should know, that support for a society’s most vulnerable members can go hand in hand with economic growth. To the extent that a society fails to invest in its children, especially children trapped in poverty, it loses some of its potential for future growth.

What isn’t so obvious, however, is the magnitude of the economic pay-off from relatively low-cost early support for children at risk.

That’s why a new study co-authored by Paul Gertler of Berkeley-Haas is attracting so much attention – in less than a year, it has already been cited in 18 other papers.

Following up on children who had taken part in a Jamaican early-childhood intervention program 20 years ago, Gertler and his colleagues found that the modest efforts back then yielded a 25 percent increase in the incomes of children when they reached adulthood.
That is an extraordinary finding.

We already have evidence of economic benefits from preschool support for children in the United States. But we didn’t know much about the impact in developing nations, and this study shows that the benefits in those countries are even more dramatic than the benefits here.

The numbers are big. In developing nations, more than 200 million children below the age of five are in such dire poverty that they are at serious risk of not reaching their full development potential. They are at risk of not getting the stimulation and support for learning from their families, and that deprivation can them back for the rest of their lives.

But Gertler and his colleagues found that modest, low-cost interventions made a big change on the children’s trajectories.

The researchers began by tapping into a Jamaican study of early intervention for stunted children in 1986 and 1987. About 129 children took part in weekly, one-hour play sessions over a two-year period. The play sessions were led by trained community health workers and were designed to provide children with the kind of stimulation that promotes learning. The workers also trained parents in providing support.

To gauge the long-term results, Gertler and his colleagues tracked down and interviewed almost all of the children who taken part in the study – 105 of the 129 children. For comparison, they also tracked down and interviewed 65 children who did not get the support but were surveyed as well in 1986.

The findings: as young adults, the stunted children who had received help had incomes about 25 percent higher than the children who received no help. The children who took part in the play sessions spent more years in school and were more likely to stay in school while holding jobs. In addition, the stunted children caught up with the performance of non-stunted children. By contrast, the stunted children who got no help continued to lag behind.

The researchers found that parents of the children became more actively invested in their children’s development. In fact, parents of the children who received support were more likely to move to a different country in search of better schools.

“As children exited the intervention period,’’ the researchers wrote, “parents may have realized that investments such as schooling had higher returns than they might otherwise have thought.”

Intuitively, it makes sense that children who get support in those very early years will do better later on. What makes this study remarkable, however, is that the researchers were able to make a solid causal connection between that early support and a person’s economic potential later in life.

Over a person’s lifetime, that impact translates into enormous increases in total income for an individual. Society as a whole benefits as well: higher productivity in the work force; better health; lower government spending on social safety-net programs.

We live in an era when many people are convinced that government programs do no good. But the cost-benefit ratio of these efforts is spectacular.

Three Powerful Ways to Measure Social Impact

By Ben Mangan

(This article is adapted from an article by the author on LinkedIn.)

If you ask fifty smart people how to measure social good, I would bet that you’ll hear fifty very different answers. Defining social good is an incredibly complex endeavor that requires a thoughtful approach.
Despite that complexity, I believe there are three clear guidelines to measure social impact at a foundational level.

Three babies

To be sure, I don’t believe in cut-and-dry, formulaic approaches to solve complex problems.  But you can spark a robust and essential conversation by examining your efforts through three particular lenses: the three E’s – Effectiveness, Efficiency and Equity.

The three E’s will guide you toward solutions that have high impact but are also appropriately priced.

Effectiveness is simply whether what you are doing actually works, and to what degree. Effectiveness may be a clear concept, but the bar for really proving effectiveness is high. Randomized control trials (RCTs) – analogous to the clinical trials for new pharmaceuticals — are the gold standard for proving that your efforts are effective. We do a great deal of this evaluation here at Haas. For some outstanding examples, see these studies by Paul Gertler, David Levine, and the team of Ernesto Dal Bó and Frederico Finan.

If you can’t do RCTs (and most of them are very expensive), you can still gauge your effectiveness by other means, such as by leveraging the proof points established by others doing similar work.

Efficiency is how much it costs to deliver your work. To understand efficiency, you need honest, transparent financials and a way to really price what it costs to deliver your products and services. Many enterprises in the social sector claim ownership for indirect “influence,” but this is notoriously difficult to accurately measure and cost out. Want a simple, eye-opening test of how much it costs you to deliver the products and services you directly provide? Take your entire budget and divide it by the number of people you can truly claim to impact very directly. (This might hurt.)

Equity is a far more normative measure, and it requires an ongoing discussion among leaders and managers about whether the blend of cost and quality is appropriately balanced. Measuring equity also involves benchmarking – how do your contributions to creating value compare in cost and quality to others in your field? Don’t give in to relativism, but do take a hard-headed look at the good you are delivering. One question I don’t hear nearly often enough is whether there’s a cheaper alternative than our own to deliver the outcomes we seek. If there is, why haven’t we pivoted to that alternative?

The dollars used by the social sector to pursue our missions are heavily value-laden and literally reflect the aspirations, priorities and preferences of the institutions and individuals who invest in our efforts. To be a good steward of these “sacred” dollars, we need to bake measurement into culture and strategy. The three E’s are a powerful way to do just this.

Scandinavia and US Business: Is Mutual Imitation a Good Idea?

By Robert Strand

I am an American and I began my career as an industrial engineer with IBM in the U.S., but I have spent the better part of the past decade in Scandinavia studying that region’s approach to sustainability and corporate social responsibility – first as a Fulbright Scholar, then as a Ph.D. student, and finally as a business school professor.

I was drawn to Scandinavia by that region’s remarkable balance of strong economic, environmental, and social performances. I wanted to understand what role business had in this.

As I once again take up residency in the U.S., now as Executive Director of the Berkeley-Haas Center for Responsible Business, I am struck by how these two very different business cultures are absorbing each other’s ideas.

For the United States, this is clearly a good thing. For Scandinavia, I am not so sure.

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On this side of the Atlantic, business priorities have traditionally been dominated by a hyper-competitive drive to dominate, trumpet success, and maximize profits. On the other side, we have what I call the “Scandinavian Cooperative Advantage” — a quiet but pervasive commitment to shared social and environmental values. Business in Scandinavia is grounded on cooperation between stakeholders and on a conviction that corporations have obligations to deliver more than shareholder returns.

The US and Scandinavia also differ on “talking the talk” versus “walking the walk.” American companies instinctively trumpet any good deeds, and the phrase “corporate social responsibility” found an early home in the United States. But Scandinavian corporations have been decades ahead when it came to actually practicing what we now call “CSR.”

It was a Scandinavian scholar, Eric Rhenman, who first formally defined the term “stakeholder” in management literature nearly a half-century ago to crystallize what Scandinavian companies were already doing: engaging with employees, customers and the broader community, and taking their interests into consideration. Today, Scandinavian business is at the top of international performance rankings on social responsibility and sustainability.

Yet now we are at a curious twist in the story. Michael Porter of Harvard, arguably the world’s most influential strategic management scholar and the man who has effectively taught millions of students that business is war, has become the champion of “creating shared value.” He now warns that American companies will jeopardize their own futures if they don’t embrace their broader responsibilities to all stakeholders.

“Businesses cannot thrive for long while their communities languish,” wrote Porter and Jan Rivkin in a new report entitled “An Economy Doing Half Its Job.” “(I)n the long run, American business will suffer from an inadequate workforce, a population of depleted consumers, and large blocs of anti-business voters.”

Sounds almost Scandinavian, doesn’t it? And in truth, as I have documented at some length with Professor Ed Freeman of Darden School of Business, “creating shared value” is essentially a repackaging of Eric Rhenman’s Scandinavian-based view that the firm exists to serve  its stakeholders. Said another way, corporations exist to serve the needs of society, not the other way around. Moreover, given the needs of society represent business opportunities, corporations are far more successful when the people within them embrace this ideal.

To the extent that Michael Porter accelerates this long-overdue conversation, the United States will be better off.
Meanwhile, Scandinavians are absorbing American-based ideas. In a major trend, Scandinavian governments have increasingly adopted an increasingly laissez-faire approach to social challenges. It might not seem like unfettered free-enterprise to American eyes, but Sweden, Denmark and other Nordic nations are slowly moving away from direct government regulation by encouraging more corporate social responsibility. In effect, they are shifting from official and public channels to private and more market-based channels to address complex social challenges. It is a form of de-regulation.

In parallel, Scandinavians are increasingly using imported American business jargon like “Corporate Social Responsibility” and more recently “Creating Shared Value.”

This isn’t just a matter of words. Traditionally, Scandinavian companies simply engaged in corporate social responsibility without attaching a special name to it. Scandinavians tend to frown on grand-standing about good deeds as humility is a cherished quality in the Scandinavian context. Most companies practiced “implicit CSR” without explicitly calling it “CSR” because Scandinavians assumed that social responsibility was a normal part of business. Why would a corporation and its employees NOT be responsible to their stakeholders?

Unfortunately, I am not sure this Americanization of Scandinavia is a good thing. There is already some concern in Scandinavia about popular resentment – both about importing American jargon and about corporate grand-standing – as this is fundamentally not Scandinavian. My deeper concern is that the Scandinavian business will become fixated on achieving a “competitive advantage” without realizing that their true advantage lies in their ability to cooperate. This cooperation benefits Scandinavian corporations and their stakeholders – it is “shared value,” as Porter now calls it.

Scandinavia has a “cooperative advantage,” and I hope they don’t lose it.

Fortunately, we can prevent that from happening by encouraging these important conversations on both sides. Americans should question the traditional narrative that business is fundamentally about competition, and they should recognize the lessons from Scandinavia about combining strong economic performance with strong social responsibility and environmental sustainability.

And Scandinavians? They should recognize what a special thing they have and not discard it in a dash to become more American.

Lisa Suennen: A Venture Capitalist’s Take on Fixing Health Care

It’s no secret that the United States health care system remains a dysfunctional mess. Despite some improvement since passage of Affordable Care Act, the US spends still spends far more per person than any other wealthy nation in the world and often gets poorer results.

About 13 percent of Americans are still uninsured. Meanwhile, the United States has the lowest average life-expectancy of any wealthy industrialized nation and ranks higher than most on infant mortality, heart disease, diabetes, and a host of other of troubling health indicators.

Is there hope? Lisa Suennen, a veteran health care venture capitalist and author, as well as a lecturer at Berkeley-Haas’s Graduate Program in Health Management, is optimistic.

For all the problems, she argues, health care in the United States offers enormous opportunities at the intersection of business and social impact. For those who want to do well by doing good, she says, health care is at an ideal juncture for improving both efficiency and health care outcomes.

“It won’t be easy, and it won’t be fast,” Suennen cautions. “This requires blowing up a lot of old business models, and nobody is going out quietly. But we have a confluence of trends that we haven’t had before. It’s almost a perfect storm to make some major strides forward.”

The elements of that perfect storm include inexpensive new technologies for monitoring health and delivering care; brutal economic and financial pressures to become more efficient; new knowledge about behavioral economics that can spur people to take better care of their own health; and a set of regulatory changes that encourage better alignment of incentives among the players in the system.

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Suennen knows her subject. Since January, she has been managing partner at Venture Valkyrie Consulting, which advises corporations and institutional investors in areas such as digital health care strategy, health technology innovation and new business models for delivering healthcare.

From 1998 through the end of 2013, she was a co-founder and general partner of Psilos Group Managers, a health-care venture capital firm with $600 million under management. Earlier in her career, Suennen spent almost a decade as a top executive at Merit Behavioral Healthcare, a firm that specialized in behavioral healthcare insurance, and helped it grow from a start-up to a firm with 35 million beneficiaries and $800 million in revenue.

Suennen is a prolific and often acerbic author and commentator on the challenges facing health care. She is the co-author, with Dr. David Shaywitz, of Tech Tonics: Can Passionate Entrepreneurs Health Health Care with Technology? She also writes a blog called Venture Valkyrie. Among her recent posts: Digital Health: What the Hell?, The eHarmonizing of Healthcare, and one about the similarities between venture capital and Las Vegas.

In August, a health care website named Suennen one of 15 “disruptive women in health care” to watch over the next year.

Suennen sees several areas of opportunity. The first is in new outpatient technology, such as biosensors, that make it possible to remotely monitor a patient’s health, analyze the effectiveness of medications, and even improve the delivery of medications. The new technologies can reduce costs, improve understanding of what works for individuals, and produce better outcomes.

Another big arena is finance and payments: tying payments more closely to health care outcomes, increasing transparency in prices, and creating a marketplace for services that is simpler, easier to navigate, and more financially rational.

“Shopping for health care should be much more like shopping on Amazon,” Suennen suggests. “Can you imagine if you went online to Amazon for a book, but didn’t know where to look for what you wanted, couldn’t figure out the price, didn’t know what the return policy was – and it was expensive on top of all that? You probably wouldn’t come back. But people face that at hospitals and with insurers, and yet come back again and again.”

Better models are on their way. Suennen is on the board of PokitDok, a venture-backed healthcare information technology firm that not only helps people search for specific health care services but allows them to get firm price quotes. It can even sort out insurance benefits and arrange payments. Walgreen’s, the retail chain, offers clinics in stores that feature a wealth of basic services and easy-to-read price lists.

Another form of innovation comes from Big White Wall, a company based in the United Kingdom that provides a new way for people to seek out mental health care, peer support, and reliable information, without stigma and with far less confusion than most people experience today.

“People seeking healthcare services deserve a good consumer experience,’’ says Suennen. “They want to find options easily. They want to know if a doctor is practicing the current state of the art. They want reasonable and reliable measures of quality and price. They want to be treated with respect and like valued customers.”

Suennen has mixed emotions about the Affordable Care Act (ACA), noting that it falls far short of its intended goal of providing universal health care – the norm in almost every other wealthy industrialized nation. “It’s well-intentioned and the goals are right, but the execution has been rough at best.”

Despite the flaws, however, she says the ACA has created an accelerant to enable for-profit businesses and entrepreneurs to produce big improvements and make money at the same time.

“The opportunities are there and many are trying hard to capitalize on them,” Suennen says. “It is a time of prolific and much-needed healthcare innovation.”

A Big Year Ahead for the Institute

By Laura Tyson

Greetings to all as we begin a new academic year at the Berkeley-Haas Institute for Business and Social Impact.

There are many exciting developments to share with the IBSI community.

*New leaders at two pillars of the Institute – Robert Strand at the Center for Responsible Business and Ben Mangan at the Center for Nonprofit and Public Leadership

*New initiatives in social entrepreneurship

*A seven-week speaker series this fall that features innovators and thought leaders at the cutting edge of business and social impact

It’s a very busy time. Let me start by welcoming two highly accomplished new leaders.

Ben ManganBen Mangan, Executive Director of the Center for Nonprofit and Public Leadership

Ben is a social entrepreneur in his own right, a popular lecturer at the Center for Nonprofit and Public Leadership, and a regular commentator for Huffington Post, SFGate, LinkedIN, and other outlets.

Ben is the co-founder and former chief executive of EARN, a thriving nonprofit organization that offers matching contributions, guidance and innovative technology to help low-wage workers build savings for the future. Since its launch in 2002, EARN has helped thousands of people save millions of dollars for education, first homes and even start-up micro-businesses. EARN’s innovation and success has attracted much national media attention, including from Forbes, the Los Angeles Times, and National Public Radio.

Having grown up poor himself, Ben brings passion and urgency to developing opportunities for those not born into affluence. As he warned at the Clinton Global Initiative America’s 2012 conference, too many Americans “remain on a treadmill of sorts, working harder and harder but not going anywhere economically.”

Earlier in his career, Ben was director of organizational strategy for Breeze.com, an international micropayments company.   Before that, he was the Midwest Practice Leader for Ernst & Young’s Public-Private Development Group in Chicago. Since 2011, Ben has won rave reviews for his classes on nonprofit leadership.   He succeeds Nora Silver, CNPL’s founding executive director, who stepped down after 11 years to focus fulltime on teaching and research.

As Nora herself remarked, “Given his clear passion for working with students, his deep experience with social enterprise, and his love of teaching, Ben is exactly what we sought.”

Robert StrandRobert Strand, Executive Director of the Center for Responsible Business

Robert, who comes to us from the Copenhagen Business School in Denmark, has deep experience as both a business executive and an academic in the areas of corporate social responsibility (CSR) and sustainable business.   He succeeds Jo Mackness, who had led the center since 2008 and was promoted this year to chief operating officer of Berkeley-Haas.

Born and raised in Wisconsin, Robert earned an MBA at the University of Minnesota and worked for more than a decade at IBM and Boston Scientific. Upon becoming a Fulbright Scholar to Norway, Robert became immersed in the study of corporate social responsibility across Scandinavia and went on to earn a Ph.D. at Copenhagen Business School.

For the past five years, Robert was Assistant Professor of Leadership and Sustainability at Copenhagen’s Centre for Corporate Social Responsibility. He was also director of the Nordic Network for Sustainability.

Robert’s work focuses on the strategic aspects of CSR and corporate ethics – topics at the heart of our own center’s mission – and on comparisons between U.S. and Scandinavian approaches. He is a frequent contributor to both peer-reviewed academic journals and major newspapers such as the Financial Times.

Robert is naturally in sync with Berkeley-Haas’s defining principles – especially thinking beyond yourself and questioning the status quo. He is passionate about redefining business leadership to encompass a broad engagement with stakeholders, and he is convinced that Haas is ideally positioned to lead the way.

“Haas has the opportunity to take a global leadership position to radically redefine the dominant narrative of business,’’ he said in an interview with Christina Meinberg of the Center for Responsible Business.

I couldn’t agree more.

New Initiative: Social Lean LaunchPad

Berkeley-Haas has a rich tradition in social entrepreneurship — our students have founded many pioneering social ventures over the years, from Fair Trade USA and World of Good to Revolution Foods.

This year we are building on this tradition with the introduction of a new course—the Social Lean LaunchPad—that applies nationally recognized lean launch principles and techniques in entrepreneurship to mission-driven social enterprises. The coursem developed by Jorge Calderon, will train entrepreneurs who want to tackle social and environmental problems with innovative, scalable, market-based solutions.

Like the original Lean Launch framework, the Social Lean approach avoids the focus on traditional, detailed business plans. Aspiring entrepreneurs prepare one-page business models – a Lean Canvas – and then systematically test and revise their models through feedback from potential customers, beneficiaries, outside experts, and other stakeholders.

The Social Lean framework adds three new knowledge elements: social venture design; the social entrepreneurial mindset; and social venture management.

Taught by Jorge Calderon and William Rosenzweig, the course will guide interdisciplinary teams of students from concept prioritization through social venture design and launch preparation.

The goal is for students to develop scalable solutions to complex social or environmental problems, to acquire a strong grasp of best practices, and to appreciate the complexity and the rewards of launching social ventures.

The Global Social Venture Competition

Now entering its 16th year, the Global Social Venture Competition is a world-wide student-led competition to discover and reward path-bending new social ventures. Coordinated by Berkeley-Haas, which hosts the final round of the competition each spring, the GSVC provides mentoring, exposure and $50,000 in prize money.

In 2014, the competition attracted nearly 600 entries from 50 nations.   The winner was Sampurn(e)arth of India, which develops profitable and environmentally sustainable strategies for recycling solid waste.

This year, the GSVC Haas team is beginning a two-year effort to refine and revise the competition process. In line with the Lean Launch approach, GSVC at Haas is moving away from business plans to shorter “pitch decks” that are similar to what real-life entrepreneurs present to potential investors.   As part of that change, the GSVC leaders at Haas want to help other teams refine and revise their plans over the course of the year.

This is a complex transition, in part because the structured Lean Launch process requires more mentoring and work at the regional and local levels. The Haas GSVC team works with 17 universities around the world to identify the finalists who travel to Berkeley each spring.

As has been the case since it began in 1999, GSVC remains a student-led event. The Lester Center, IBSI and a dedicated Advisory Board help the students attract financial sponsors, coordinate with regional partners, line up mentors and judges, and organize the final two-day competition.

Incorporating the Social Lean tools and methodologies in the GSVC, we can help social innovators develop even sharper and bolder ideas in the years ahead. Look out!

The Social Impact Speaker Series

Working with a student team in charge of the Social Sector Speakers’ Series, IBSI will host seven panels this fall that will highlight the many alternative pathways to careers with social impact. The series is an opportunity for students to learn about the possibilities as well to network with others in the Haas community who share their interests.

I will launch the series this Thursday, Aug. 28, with an introduction to the faculty, staff and programs in social impact at the Haas School.

In the subsequent weeks, panels will feature practitioners of corporate social responsibility programs at companies such as Google and Levi Strauss; a broad variety of social impact investors; and entrepreneurs who have started social ventures in sustainable foods and wellness.

Click HERE for the schedule.

All of these initiatives, along with others still to be announced, will further secure Berkeley-Haas’s position as national leader at the intersection of business and social impact. Stay tuned.

 

Appreciation: Priya Haji, Champion of “Inspired Competition”

The world of social entrepreneurship, and all those who believe in redefining business, lost a pioneer this summer.

Priya Haji photo
Priya Haji, a Berkeley-Haas graduate who launched no fewer than five thriving social enterprises, died unexpectedly in July of an apparent pulmonary embolism. She was 44, the mother of two children, and the CEO of her most recent venture – SaveUP, Inc.

“She was the best social entrepreneur of our generation – that’s who we lost,’’ said Van Jones, the long-time environmental and human rights advocate, and a formidable social entrepreneur himself, who spoke at a Haas memorial for Priya. “Nobody even comes close.”

Priya was a force of nature who found new ways to tap the power of markets and entrepreneurship in addressing difficult social problems. Her ventures provided health care for the poor in Texas; treatment for alcohol and drug addiction in East Palo Alto; market access to craftspeople in low-income countries; and help for Americans with crippling personal debt.

Beyond the organizations she created, which are still strong, she left a major legacy in the models she honed for what she called “inspired competition.”

“What if you could have a profit-making business that drives itself and is actually creating good in the process?” she asked the audience at a TED talk in 2011. “Is that possible? Can we even do that?”

The answer was yes. Three things were key, she argued: building up a market of informed and socially aware consumers; delivering entrepreneurial products; and providing clear standards for ethical labor and environmental practices. With those elements in place, she argued, more and more for-profit companies would see social responsibility and sustainable business as part of their competitive strategies.

Priya started her career early.

At 16, she helped her father, a family doctor, open a free health clinic in their hometown of Bryan, Texas. As a 21-year-old undergraduate at Stanford University, she co-founded Free at Last, an addiction treatment center in East Palo Alto. That center combined a community-based approach with long-term programs, including for housing and training, to help addicts rebuild their lives. It was a sharp break from the conventional wisdom, which held that the key to treatment was in taking people out of their communities and the problems that came with them.

Today, the center is recognized for helping reduce both drug addiction and crime in East Palo Alto, and it has become a national model for treatment.

“The best thing about being 21 is that you don’t know that something is impossible,” Priya recounted in 2011. “We had an idea that, in a community of African-Americans and Latinos, the community’s own members could heal itself. When you think you see the problem differently and you see a solution, and you just go for it, what we ended up building became a national model program.”

In 2001, Priya came to Berkeley-Haas for an MBA, explaining that she wanted to develop the skills to scale up new strategies and organizations for bringing about constructive change.

In 2004, one year after graduating from Berkeley-Haas, she co-founded World of Good, an online marketplace in partnership with eBay that connects artisans in low-income developing nations with retailers and consumers in the United States. The venture has lifted incomes for tens of thousands of craftspeople in more than 70 countries, especially producers who are certified as paying livable wages and employing sustainable environmental practices. In 2010, eBay acquired World of Good.

In 2011, Priya launched SaveUP, a website and personal-finance app that offers rewards and prizes to people who build up savings or reduce debt. Each time customers reduces their debt, for example, they get credits that they can use to enter contests or lotteries that offer prizes. In its first two years, the company estimates, it has helped Americans pay down $856 million in debt and build up $1.2 billion in savings.

Anyone who knew Priya remembers her for her passion, audacity, determination, and pragmatic brilliance. She embodied all of Berkeley-Haas’s defining principles: Beyond Yourself; Question the Status Quo; Confidence Without Attitude; and Always a Student. Just a few months before she died, Priya came back to Haas to participate in an “all-star” panel at the annual Global Social Venture Competition.

We at the Institute for Business and Social Impact join many others in mourning the loss of Priya.

But we also recognize that she greatly advanced our understanding about new strategies for addressing the world’s difficult challenges. We will be learning from her for years to come.

Perception and Reality: Why Women are More at Risk of Being Duped in Business

Do gender stereotypes about female gullibility make women more likely to be deceived in business negotiations? New research, led by Laura Kray of Berkeley-Haas, indicates that the answer is yes.


The paper is based on a trio of empirical studies of gender perceptions in negotiations that involved car sales, antique furniture, and real estate.

Among the findings:

*Women are likely to be seen as less competent than men at negotiation and as less likely to scrutinize a deal for signs of deception.

*Though women are more conditioned than men to display warmth and kindness, being perceived as “nice” isn’t a major liability in negotiations. In fact, negotiators who perceive their counterparts as warm are more likely to raise their ethical standards.

*The mere perception that women are more gullible exposes them to more deception in reality. Though it’s not clear that women actually are easier to mislead, the perception itself prompts more of their counterparts in negotiations to make misleading and even blatantly false claims. As a result, women are deceived more often than men.

Kray co-authored the paper with Alex B. Van Zant, a Ph.D. candidate at Berkeley-Haas, and Jessica A. Kennedy, a Ph.D. graduate of Berkeley-Haas and now an assistant professor at Vanderbilt University.

The first study measured gender stereotypes in the context of buying and selling cars. The study entailed 131 men and women at a marketing research firm, all of whom were asked to imagine themselves trying to sell a car. They were also asked whether they saw women or men as easier to mislead, and whether it was easier to mislead people who displayed warmth or competence.

The respondents, men and women alike, gave men the edge in spotting deception. Kray and her colleagues then tried to dissect the characteristics that fuel those stereotypes. The participants expected men to communicate more business competence, and they expected this perception to work in men’s favor during negotiations.

By contrast, participants expected women to display warmth and kindness – but they did NOT think the display of warmth necessarily implies more gullibility.

“The perception of being nice is less of a liability in a potentially deceptive situation than is appearing incompetent,’’ the researchers concluded.

In a second study, participants were asked to imagine themselves trying to sell an expensive antique chair that had a damaged leg. The participants were told that the damage had been concealed by a temporary fix, but that the leg would wobble as soon as the chair was used. The participants predicted that female buyers would be less likely than males to scrutinize the chair for such a defect, and they predicted that sellers were more likely to lower their ethical standards with buyers perceived to be incompetent.

In the third study, drawing an exercise involving nearly 300 MBA students, participants were paired up in the roles of real estate agents on opposite site of property sale. The selling agents were under instructions to sell the property to a buyer with a “tasteful” and preferably residential purpose. The buy-side agent, however, was representing a person who wanted to build a high-rise hotel.

The students acting as the buyers’ agents were given three options. They could be honest, saying they were not allowed to discuss their client’s intentions – which would raise obvious suspicions. They could be vague or ambiguous about the meaning of words like “residential.” Or they could outright lie.

Two independent judges coded the responses on a five-point scale of deceptiveness. Most of the buy-side agents gave responses that were in the middle-range — vague or ambiguous. But the relatively small percentage of people who blatantly lied were significantly more likely to lie if their counterparts were female. And people who gave the most honest answer were more likely to do so if their counterpart was a man.

This gender bias in deception patterns was also evident in self-reported lie admissions: buyers admitted lying more to women than they did to men.

“We found that women’s disproportionate exposure to deception lured them into more deals under false pretenses than men,” Kray and her colleagues write.

The researchers note that the women in that last study weren’t any more honest than the men. Women and men both seemed to share the perception that women were easier to mislead – and they were both more likely to seize the opportunity.

The researchers caution that the studies don’t prove that women are in truth more gullible than men. Rather, they show that the perception of women’s gullibility generates more attempts to mislead them. It’s still an open question as to whether women would prove better or worse at ferreting out deception if they were deceived at the same rate as men.

Either way, however, gender stereotypes about low competence and high gullibility have a pernicious effect on women. Women are more likely than men to experience deception in face-to-face negotiations, and they are more likely than men to be lured into deals under false pretenses.

How Mark Zuckerberg Can Help the Bay Area’s Poorest Schools

By Kristiana Raube

Wicked public challenges, such as providing high-quality education or breaking the cycle of poverty, require collaboration between all sectors – government, philanthropists, for-profit businesses, and the communities themselves.

But harnessing all those elements is harder than it sounds, even when you have a dedicated source of funding for an ambitious new effort.

The Bay Area is about to become a laboratory for exactly this kind of opportunity and challenge. Mark Zuckerberg, the founder of Facebook, has pledged $120 million over five years to revitalize public schools in several of this region’s most underserved communities.

Public Schools California

It’s a courageous and praiseworthy move by Zuckerberg and his wife, Priscilla Chan. Unfortunately, as they themselves know first-hand, money and good intentions do not guarantee success. Since 2010, the couple has pumped $100 million into an attempt to radically revamp the schools of Newark, N.J.

But as the New Yorker magazine reported in May, that effort has produced a lot of conflict and local criticism without – at least so far – significant improvements in educational outcomes.

It’s wrong to dismiss the Newark effort as a failure. Impoverished school districts face a complex tangle of challenges, from budget woes to social turmoil. There are no simple solutions, and almost any proposed reform will spark conflict. Even if a reform is exactly what a school district might need, it still takes years to produce a measurable improvement in overall student performance.

But since Zuckerberg and Chan are taking a second bite of the apple, it’s important to reflect on the lessons so far about the interplay between private and public efforts in solving public problems. This is a precious opportunity, but it’s an easy one to fritter away.

As Zuckerberg and Chan themselves have remarked, even $120 million is a “drop in the bucket.” The Oakland school district’s annual school budget alone is more than $1 billion.

The real opportunity here is for innovation, for testing promising ideas and building on the results.

Governments have the scale to reach the entire public, but they are inherently risk-averse and weak on innovation. Philanthropists like Zuckerberg and Chan have more freedom, and can play a role similar to that of venture capitalists. They can provide seed funding for new strategies, and accept the risk that many of their projects will not work out as hoped. If a project does produce measurable benefits, however, it offers a template that countless other school districts to replicate at much less risk than if they had started out from scratch.

If Newark showed one thing, it was the dangers of over-confidence. Then-mayor Cory Booker declared at the outset that “we know what works.”

That should have been a red flag. No matter how good an idea might be, it’s dangerous to impose it from the top down. It’s crucial to listen to people in the community – parents, teachers, local community leaders. If people in the community feel that a reform is being imposed on them from outside, even great ideas will either be blocked at the outset or wither and die from apathy. Even altruistic reformers can provoke powerful resentment among parents and educator.

It’s important to remember that parents, teachers and local community leaders have crucial knowledge. They are the ones on the front lines, and they understand the nuances of the challenges in a particular neighborhood or school. These are also the people who have the highest stakes in their schools, and they will be around long after the philanthropic money has been spent.

To their credit, Zuckerberg and Chan are thinking along these lines. In a column for the San Jose Mercury News, they emphasized the importance of “listening to the needs of local educators and community leaders so that understand the needs of students that others miss.” They also seem to be targeting modest goals: grants to provide more computers and connectivity; teacher training; leadership training for principals; programs to ease the transition between middle and high school.

All this is good. Ironically, however, the new risk may be excessive humility.

If Zuckerberg and Chan’s foundation, Startup:Education, simply supports a wish-list from local school administrators, it’s easy to imagine their money being frittered away with almost nothing to show at the end.

There is no shortage of genuine bread-and-butter needs. California ranks almost dead last among the nation’s 50 states in per-capita spending on public schools. Schools need everything from computers and books to lab equipment and teachers’ aides.

Those aren’t problems that philanthropists can solve with a one-shot injection of money. They require ongoing funding from local, state and federal taxpayers. “Philanthropy is no substitute for government funding. You can’t say that loud enough,” Robert W. Conn, president of the Kavli Foundation, told the New York Times.

What philanthropists can and should be doing is underwriting innovation and bold ideas. Today’s schools still tend to be based on assumptions about the workplace of the 1950’s and 1960’s rather on than today’s hyper-connected and fast-changing information economy. Educators themselves need training to keep up and catch up with the changing nature of work itself.

We are all groping for answers, especially for students who wrestle with huge social and financial obstacles in their day-to-day lives. But that isn’t a reason to think small. It’s a reason to focus on the big questions, try bold ideas that schools can’t or won’t try themselves, measure the results, and learn from both the successes and failures.

Over the long-term, those are the kinds of investments that will really pay off.

How Our “Better Angels” Can Affect Economic Decisions

By Ernesto Dal Bó

Do moral ideas have power? We would like to think so. We all appeal to certain actions being “right” as a way to justify why we want certain things done. And implicitly, we expect those moral appeals  to carry force, to disarm opposition, to persuade, and to drive changes in the concrete world of policy, conflict, jobs, and money.

The ubiquitous nature of moral appeals can be puzzling to an economist: We have traditionally assumed that we live in a material world, and that material incentives are the most powerful driver of actions.

That said, behavioral economics and the exploration of non-material motivations have taught us much over the past two decades. Economists now accept the fact that individuals can be altruistic, and that they are sensitive to the intentions and motivations of those with whom they interact. We have learned that we are highly social animals: We care strongly about what others do, and we are reluctant to fall out of line.

Experiments in psychology and economics have shown that it is possible to affect behavior by indicating that a particular action is popular. For example, hotels have found that a good way to save money on laundry is to get customers to re-use their towels, and an effective way of achieving this is to tell customers that the vast majority of other customers re-use their towels.

But manipulating beliefs about what “the majority does” appeals to a herd mentality, which can often lead people to immoral acts. To me and my brother Pedro Dal Bó, an economist at Brown University, it seemed crucial to learn whether strictly moral ideas can be used to affect behavior. Could we prove that pure moral suasion, which is so widely attempted, actually works? And could we do this by invoking unadulterated ethical principles, devoid of any herd mentality or social components?

For me, this was a personal question. Every spring, I teach Ethics to nearly 240 Berkeley-Haas MBA students. If ethical discourse has no impact on behavior, why train people to think and express clear moral ideas?
As strange as it may sound, a rigorous, experimental investigation of the power of strictly moral ideas to affect behavior had never been conducted. My brother and I performed a series of experiments in Berkeley’s XLab, the results of which we recently published in the Journal of Public Economics.

In our experiments, subjects played games where everyone did better when individuals cooperated but each person had a material incentive to withdraw cooperation for the sake of individual profit. Individuals got to interact a total of 20 times. Halfway through their play, some people were randomly “treated,” as in a clinical trial, with moral messages. One message was based on the Golden Rule, that you should treat others as you would want others to treat you. Another was based on the utilitarian principle that an action is moral if it benefits the overall group. Other subjects were treated with different, non-moral messages.

We found something a hard core economist should find surprising: Compared to non-moral messages, the “immaterial” moral messages made people more cooperative… but only for a while. On its own, the moral appeal lost much of its impact as the game went on. But that changed when the game allowed players to punish those who had been uncooperative. Under the punishment option, people could reduce the returns to people who cooperated very little. When that option was available, moral suasion worked permanently. In other words, we found a powerful interactive effect between a very material element of punishment and the very non-material element of moral sensibility.

We then investigated the mechanisms behind the moral suasion effect. It’s possible that exposure to moral ideas makes us more cooperative, regardless of what others do. Another possibility is that moral suasion leads us to expect better behavior from others, and we become more cooperative because we want to be “closer to the pack.”

With two additional experiments, we demonstrated the presence of both effects. Moral suasion does change our preferences, but it is much more powerful when people know that others are getting the same message. This implies the existence of a “moral social multiplier.”

These findings have important implications for the management of organizations: Moral discourse can be an effective way to promote cooperation, especially when everyone knows that shirkers can be punished and that everyone got the memo.

The more general takeaway is that moral ideas can be wielded to affect material outcomes. In a recent book, Steven Pinker claims that what President Lincoln called “the better angels of our nature” have played a gradual role in making the world a less violent place. Our findings suggest that we can talk to those better angels and put them to work for the common good.

Berkeley-Haas Takes Stock of Its Broader Mission

It’s no secret that one of Berkeley-Haas’s defining characteristics is its emphasis on placing business in the larger context of social and environmental responsibility.

The school’s four defining principles, starting with “Question the Status Quo” and “Beyond Yourself,” are imbued with the idea of redefining business leadership and looking for ways to alter the trajectory of trends that are increasingly unsustainable.

But the range of programs and activities tied to that broader mission is so wide that even people immersed in the Berkeley-Haas community have only a fragmentary sense of what’s happening or who is driving it.

The Institute for Business and Social Impact — which includes the Center for Responsible Business, the Center for Nonprofit Leadership and Management, the Graduate Program in Health, and the Global Social Venture Competition – is a big part of that effort.

But the broader mission to spur “path-bending” leadership permeates every corner of the school. It is embedded in the core curriculum as well in electives and our experiential courses in applied innovation. It is a major focal point of research, in areas as diverse as clean technology, sustainable business products, social entrepreneurship, and poverty reduction. It is part of a constant dialogue that occurs through conferences, speakers series, published research business-plan competitions and student-run activities.

Now there is more complete picture. Earlier this month, the school submitted a comprehensive report on its efforts to carry out the United Nations Principles on Responsible Management Education – or PRME.

Under PRME, business schools around the world have pledged to promote and advance principles aimed at developing leaders and strategies to address urgent global problems, from climate change to entrenched poverty. Business schools that sign on to the PRME principles are required to document their progress, as well as the work they believe still needs to done, every two years. Berkeley-Haas signed on in 2012, and this is its first report.

The new report is packed with information, starting with a description of how the school’s defining principles and values shape admissions, the curriculum, research and student activity.

As the report makes clear, this is both a top-down and a bottom-up effort. Berkeley-Haas has a long tradition of social sector innovation and the development of new strategies to harness the power of markets toward a more sustainable future.

“We see it as our responsibility to equip each student with the tools and the mindset to become an innovative leader and to make that difference, one at a time,’’ writes Dean Richard Lyons in an introductory message. “We have codified a culture that values questioning the status quo and becoming stewards of something larger than ourselves.”

The report notes that Berkeley-Haas both requires and enables business students to assume their broader responsibilities. The curriculum includes required courses on ethics, for example, as well as a vast array of electives and courses in applied innovation. But students themselves play a leading role through dozens of student-run organizations. The annual Global Social Venture Competition, in which social-enterprise start-ups from dozens of countries compete for $50,000 in awards, is one of many such efforts.

That is just the tip of the iceberg. Berkeley-Haas is a hub for public-private partnerships in clean technologies; cutting-edge research on new strategies for poverty reduction and health care; new studies on the role of women in business; and new ways to challenge conventional wisdom.

The report cautions that this remains a work in progress, and it outlines objectives for the years ahead. But it leaves no doubt that the defining principle of “beyond yourself” is deeply and permanently embedded in the Berkeley-Haas DNA.