Chicago Booth Magazine Summer 2012

The University of ChicagoBooth School of Business

5807 South Woodlawn Avenue

Chicago, Illinois 60637

Change Service Requested

Nonprofi t Organization

US Postage

P A I DPermit No. 4444

Twin Cities, MN

How Scott Griffith, ’90, CEO of Zipcar, drove car sharing to the mainstream

Opening New Routes

CH

ICA

GO

BO

OT

H M

AG

AZ

INE

VO

L. 3

4, N

O. 2

, SU

MM

ER

20

12

The University of Chicago Booth School of Business Summer 2012

Critical DialoguesDean Sunil Kumar gets the inside track on Zipcar from CEO Scott Griffith, ’90 20

Temptation’s Siren SongResearch by Wilhelm Hofmann investigates desire, willpower, and self-control 10

Good Energy Experts discuss fueling the future at the 60th Annual Management Conference 26

Accessorize with Booth: It all started when David Booth, ’71, suggested that the school

should have a signature tie. The student-led Dean’s Marketing Advisory Committee

offered to help run a design contest, which concluded in May, with a $300 check and

bragging rights for the best overall design going to fi rst-year Full-Time student Joseph Ryu.

Meenakshi Dash, ’08, won $100 for the most original design and Mark Zmijewski,

Leon Carroll Marshall Professor of Accounting, won $100 for scoring the most “likes”

on Facebook. The fi ve-judge panel evaluated the designs for originality, suitability for a

business setting, and ease of manufacturing. To view all 60 design submissions, visit the

Booth Community Facebook page at Facebook.com/ChicagoBoothBusiness.

From left to right: David Booth, Meenakshi

Dash, Joseph Ryu, and dean Sunil Kumar.

Not pictured: Mark Zmijewski.

Chicago Booth Magazine…

Get it now Download the new Chicago Booth app at ChicagoBooth.edu/Boothapp.

to Go!Stay connected to alumni

stories, faculty news, and more—

wherever you are.

Get Chicago Booth Magazine on

your iPad or iPhone by downloading

the new complimentary Booth app.

1Summer 2012 Chicago Booth Magazine

F E A T U R E S

Faculty Digest 9

Balancing Desire and Self-Control in Everyday Life A new paper by Wilhelm Hofmann investigates the temptations we struggle with

the most—from indulging in food and sleep to compulsively checking email—and why we respond

to them in the ways that we do.

By Erin O’Neill

Capital Ideas: Consumption Strikes Back 16Research by John Heaton on the correlation between stock returns and expected future

consumption offers a measure of long-run risk that proves fundamentals can drive risk

premiums in the stock market.

By Vanessa Sumo

Cover Critical Dialogues 20Zipcar CEO Scott Griffi th, ’90, tells dean Sunil Kumar about his journey steering an idealistic

Boston-area start-up into an infl uential public company.

Edited by Judith Crown

Management Conference 2012 26Chicago Booth faculty and industry experts considered the future of alternative fuels and the

challenge of reducing greenhouse gas emissions. Breakout sessions discussed corporate tax policy

and how data is best used to understand consumer shopping habits.

By Rick Popely, John Slania, and Duncan Moore

I N E V E R Y I S S U E

Letters & NewsFrom the Dean . . . . . . . . . . . . . . . . . . . . . . 2

News Update . . . . . . . . . . . . . . . . . . . . . . . . 5

Alumni NewsAlumni News . . . . . . . . . . . . . . . . . . . . . . 35

Career News . . . . . . . . . . . . . . . . . . . . . . . 39

Class Notes . . . . . . . . . . . . . . . . . . . . . . . . 43

In Memoriam . . . . . . . . . . . . . . . . . . . . . . . 63

Back StoryChad Syverson . . . . . . . . . . . . . . . . . . . . 64

Chicago Booth Magazine

The University of Chicago

Booth School of Business

Vol. 34, No. 2, Summer 2012

Dean

Sunil Kumar

Editor

Judith Crown

Associate Editor

Kate Fratar

Creative Director

Michael Rezac

Designer

Brian Ross

Print Production Manager

Kristen Lewis

Contributors

Kate Ancell

Paul Audia

Kalliope Dimitrakopoulos

Dan Dry

Allan Friedman

Matthew Gilson

Dan Kedmey

Chris Lake

Duncan Moore

Erin O’Neill

Mary Sue Penn

Rick Popely

Beth Rooney

Molly Schultz

John Slania

Gerta Sorensen

Chris Strong

Vanessa Sumo

Chelsea Vail

Chicago Booth Magazine

(ISSN 1072-7612) is published by

The University of Chicago


[email protected]

ChicagoBooth.edu/magazine

© 2012 The University of Chicago


All rights reserved.

Direct address changes to

directory.ChicagoBooth.edu

26

Chicago Booth Magazine Summer 20122

The pomp of convocation is behind us, yet summer brings its own excitement as we welcome

the next crop of faculty and students to Chicago Booth, as well as the newest group of graduates

to our alumni community. It is a time when the institution renews itself in a fundamental way.

As new people enter our campuses, the topics studied and taught change and the methods used

to study and teach change; the intellectual conversation changes in a lasting way. That said, if we

have done our job well recruiting faculty and students, our new crop will easily live up to our

standards of rigor, evidence, and open debate.

Thus far we have 12 new faculty members joining us in the next academic year: one full

professor and 11 assistant professors. Factoring in departures, we expect a net gain of seven

faculty members. They come from fi elds ranging from accounting and economics to marketing

and statistics. There is no doubt in my mind that our new crop will help enhance and broaden

the school’s intellectual footprint.

Two of our “rookie” hires were offered jobs at Booth last year. They chose to defer joining so

that they could spend a year in industry bolstering the applied side of their work. They spent last

year at eBay and Google, respectively, acquiring practical insights to complement their outstand-

ing academic training. I see this approach, where new members of the faculty invest signifi cant

time at the beginning of their careers in industry, as a very positive development.

Summer is bittersweet. We congratulate and

bid adieu to our graduating students. In turn, we

welcome our latest alumni. As you will read in this

issue of Chicago Booth Magazine, the career choices

of Booth graduates continue to diversify (page 39),

with marketing, e-commerce, entrepreneurship, and

general management featuring prominently in addi-

tion to consulting and fi nancial services. The last two

industries continue to account for more than half of

the class job placements, but graduates’ interests—

and their options—are broadening.

At the time of writing this letter, we have not yet

fi nished admitting the class of 2014. All indications

are that this will be another excellent class in terms of objective metrics like the median GMAT

score and GPA. Matriculating students not only come from a variety of backgrounds and have

diverse work experiences, but they also intend to use their Booth experience in a variety of ways

to support their aspirations. So far, our incoming students hail from 50 different countries.

Finally, summer is a good time to experiment with new ideas. One such idea is LaunchPad,

a workshop intended to help younger alumni with entrepreneurial ambitions get started on

putting their plans together. More experienced alumni serve as mentors and judges; Booth fac-

ulty run the workshop. We have done a few such workshops in Chicago, and, this year, we are

experimenting globally. This summer we will run a LaunchPad workshop at the University of

The New Crop

Sunil Kumar, Dean and

George Pratt Shultz

Professor of Operations

Management

Matt

hew

Gilso

n

“Matriculating students not only

come from a variety of back-

grounds and have diverse work

experiences, but they also intend

to use their Booth experience

in a variety of ways to support

their aspirations.”

Letter from the Dean


Chicago’s Beijing Center and one at Booth’s London campus. We see this initiative as one

effective way to support younger alumni globally and bring them closer to more experienced

alumni and the school.

While Chicago Booth is in great shape, we cannot afford to sit still. Given the breadth of

career aspirations of our students and alumni, and the range of issues confronting businesses

today, it is evident to me that for Chicago Booth to get better, we have to get broader. It is impor-

tant we do this without sacrifi cing our strengths and values. Each year, the new crop brings us

closer to this end. Please join me in welcoming our new faculty, students, and alumni. I eagerly

look forward to our community’s future accomplishments.

Sunil Kumar

Dean and George Pratt Shultz Professor of Operations Management

[email protected]

Letter from the Dean


“There is a level of engagement, hard work, and enthusiasm among the students that is absolutely infectious.”

—Anne Thomas,

W. Allen Wallis Distinguished Fellow

Chicago Booth attracts the best and brightest students.

The Annual Fund opens doors for many of them,

including students such as Anne Thomas. With your

continued support, there is no limit to what Chicago

Booth can achieve.

ChicagoBooth.edu/possibilities


Booth Receives $3.5 Million in Gifts

New Deputy Deans Appointed

Booth TV Studio Debuts

H E A R D A T C H I C A G O B O O T H

Consulting is a wonderful thing to do, but if you want to be the hero, it might not be the right thing for you.

Beth Rooney

Punit Renjen, chairman of the board, Deloitte LLP

Renjen sat down for a “fi reside chat” with dean Sunil Kumar

and 100 Booth students on a visit to Gleacher Center in

January. Renjen discussed how Deloitte has managed to grow

its consulting business by double digits in four of the past fi ve

years, despite a challenging economy. For complete coverage

of the event, go to ChicagoBooth.edu/ontheweb and enter the

keyword “Renjen.”

5


News Update

New Chief Information Officer Leads Information TechnologyKevin Boyd has joined Booth as senior director, information tech-

nology, and chief information offi cer. He has overall technical

responsibility for the school’s campuses in Chicago, London, and

Singapore, and manages a staff of 45 in operations, application

development, and project and service management. He replaced

Ligia Moreno, who retired after more than eight years at Booth.

For the past two years, Boyd was director of the project manage-

ment offi ce at the General Board of Pensions (Wespath) in Glenview, Illinois. Earlier in

his career, he held technical leadership positions at Tribune Company, CNA Financial

Corp., United Airlines, Bank One Corp, and W.W.Grainger, Inc.

Boyd taught e-commerce at Northwestern University as an adjunct faculty

member from 2003 to 2012. He has a master’s degree in communications

systems, strategy, and management from Northwestern and a bachelor’s degree

from Marquette University.—Chicago Booth Staff

H E A R D AT C H I C A G O B O O T H

As one of the world’s leading business schools in finance, Booth has the faculty capabilities, cutting-edge application, and research to thoroughly cover the CIMA curriculum and bring it to life.John Heaton, Joseph L. Gidwitz

Professor of Finance, on Booth’s

accreditation as a registered

education provider for Certifi ed

Investment Management Analyst

(CIMA) certifi cation. Heaton will

serve as faculty director for the new

program. Booth joins Wharton in

offering the educational component

for CIMA certifi cation, which is

designed for advanced investment

advisors and consultants.

Two Deans to Fill Leftwich’s ShoesDean Sunil Kumar named

two deputy deans for faculty

to replace Richard Leftwich,

who has held the post for the

past eight years and plans to

step down on July 31. The

second deputy dean is being

added as a result of the growth in faculty, Kumar said, and in order to accommodate

the expected future increase in demand.

Steven Davis, William H. Abbott Professor of International Business and Econom-

ics, began sharing responsibilities with Leftwich on April 1. John Heaton, Joseph L.

Gidwitz Professor of Finance, will succeed Leftwich on August 1.

Leftwich, Fuji Bank and Heller Professor of Accounting and Finance, joined Booth

in 1979 and will continue to serve as a member of the faculty. Under his leadership as

deputy dean, the number of tenure-track faculty grew from 113 to 130, with 12 new

hires for the 2012–13 school year. Overall, the number of teaching faculty grew from

169 to 197 during his tenure.

Davis, who joined the Booth faculty in 1985, is an applied economist with

research publications on employment and wage behavior, worker mobility, job loss,

and other topics. He is the former editor of the American Economic Journal: Macro-

economics, a research associate with the National Bureau of Economic Research, an

economic advisor to the US Congressional Budget Offi ce, and a visiting scholar at

the Federal Reserve Bank of Chicago.

Heaton studies asset pricing, portfolio allocation, and time-series economics. His

research in these areas has earned him numerous fellowships, including an Alfred P.

Sloan Research Fellowship, and a National Science Foundation Fellowship. Before join-

ing Booth in 2000, he was the Nathan S. and Mary P. Sharp Distinguished Professor of

Finance at the Northwestern University Kellogg School of Management. He is a former

editor of the Review of Financial Studies.—Chicago Booth Staff

A P P O I N T M E N T S

Bet

h R

oone

y

Steven Davis

Bet

h R

oone

y

Richard Leftwich

Dan

Dry

John Heaton

Cou

rtes

y of

Kev

in B

oyd

Kevin Boyd


P H I L A N T H R O P Y

Gifts Support Entrepreneurship,Energy Research Two contributions to Chicago Booth will enable the school to develop new initiatives

in the fi elds of entrepreneurship and energy. A $2 million gift from Edward L. Kaplan,

’71, will endow the New Venture Challenge (NVC), of which he has been the title

sponsor since its fi rst competition in 1996. A $1.5 million gift to the Energy Policy

Institute at Chicago from the Fuel Freedom Foundation will be used to explore eco-

nomic and policy questions surrounding transportation fuels.

The NVC endowment, once fully funded, will enable the competition to be self-

sustaining for years to come. Hosted by the Polsky Center for Entrepreneurship, the

NVC has helped launch scores of companies, including GrubHub, Inc., Braintree, and

BenchPrep, all based in Chicago. Kaplan is cofounder of Lincolnshire, Illinois–based

Zebra Technologies Corp., a pioneering company in barcode technology that went

public in 1991.

“Ed was an important catalyst for the New Venture Challenge and, more broadly,

for the Polsky Center,” said Steven Kaplan, Neubauer Family Distinguished Service

Professor of Entrepreneurship and Finance and faculty director of the Polsky Center.

“In the mid-1990s, he was one of a few alums who advocated that Booth should

develop a strong entrepreneurship program.”

The NVC’s infl uence has extended to the University of Chicago campus and

beyond. The more-than 75 alumni companies whose founders participated in the

competition have raised more than $242 million in equity capital collectively and have

created more than 1,000 jobs. This year, the NVC received a record 119 applications,

up from 89 entries in 2011.

“It is one of the country’s most successful venues for creating new business

ventures,” said Ellen Rudnick, clinical professor of entrepreneurship and executive

director of the Polsky Center.

“The endowment now being created by the Kaplan Foundation will insure the

long-term viability of the NVC and enable it to expand beyond its current limits,”

Rudnick said. “We are thrilled that Ed’s name will be forever linked to this capstone

program at Booth.”

Another fl ourishing discipline at Booth gained recognition with a gift from

the California-based Fuel Freedom Foundation to the Energy Policy Institute at

Chicago (EPIC).

Founded in 2011, EPIC is an interdisciplinary joint enterprise of Chicago Booth

and the Harris School of Public Policy that focuses on economic and social policy

questions related to energy. The gift will help launch the Initiative on the Future of

Transportation Fuels.

“This generous gift will help EPIC conduct the data-driven research that policy

makers and business leaders need to make sound, evidence-based energy policy

decisions,” said Robert Topel, codirector of the center and Isidore Brown and Gladys

J. Brown Distinguished Service Professor in Urban and Labor Economics.—Kate Fratar

To learn more about companies involved with the New Venture Challenge,

visit ChicagoBooth.edu/nvc

News Update

B Y T H E N U M B E R S

Booth Faculty on the AirIn early March, Booth opened

the Harper Center TV studio.

Professors were soon inter-

viewed on topics ranging from

sports to the European debt

crisis and US monetary policy.

Number of faculty

appearances as

of late May

Number of networks:

Number of professors

interviewed:

John Cochrane

Austan Goolsbee

Randall Kroszner

Tobias Moskowitz

Raghuram Rajan

Luigi Zingales

mrezac

Typewritten Text

mrezac

Typewritten Text

mrezac

Typewritten Text

mrezac

Typewritten Text

mrezac

Typewritten Text

mrezac

Typewritten Text


FOR OVER 50 YEARS,

Find out more at www.crsp.ChicagoBooth.edu.

WE’RE NOT DONE YET.

CRSP HAS EMPOWERED

THE WORLD OF FINANCE.

www.crsp.chicagobooth.edu

9Summer 2012 Chicago Booth Magazine 9

IQ and Investing Prowess

Two Sides to Innovation

Why Brand Preferences Vary

Dan Dry

I N T H E H E A D L I N E S

It’s very clear that the outside world is rethinking the India story.Raghuram Rajan, Eric J. Gleacher Distinguished Service Professor of Finance and Charles M. Harper Faculty Fellow

India’s business boosters have been consistent in promoting

the potential of “brand India,” especially at prestigious venues

such as the World Economic Forum in Davos, Switzerland,

where Rajan, who is economic advisor to India’s prime minister,

spoke on the issue. But India’s country-with-great-potential

story is wearing thin among international business and political

leaders, according to Rajan and others, a view that was cited in

a February column in the Hindu Business Line.

To learn more about Rajan’s research, visit

ChicagoBooth.edu/magazine/facultylinks


On average, participants enacted 42 percent of the media

desires they had actively attempted to resist.

Hofmann credited this fascinating soft spot to societal

norms and our general feelings about the cost-benefi t analysis

of these activities. “Modern life is a welter of assorted desires,

marked by frequent confl ict and resistance—the latter with

uneven success,” Hofmann explained. “With cigarettes and

alcohol, there are more costs—long-term, as well as mon-

etary—and the opportunity [to consume] may not always be

the right one. Desires for media may be comparatively harder

to resist because of their high levels of availability and also

because it feels like it does not ‘cost much’ to engage in these

activities, even though one wants to resist.”

But, as vices go, aren’t work and media-usage relatively

good ones to have? According to Hofmann, it depends on

your overall goals. The study warns of the potential for

media habits to develop into abuse and noted, “Whether

underregulation of media use causes serious problems for

Westerners is an intriguing issue.” So, while compulsively

checking email or spending time on Facebook offers a quick

fi x for boredom and one’s need for connectedness, doing so

comes with its own pitfalls. “Even though giving in to media

desires is certainly less consequential,” Hofmann said, “the

frequent media use may still ‘steal’ a lot of people’s time and

attention away from other things that matter.”—Erin O’Neill

Faculty Digest

t happens to the best of us. We vow to lose 10 pounds.

We swear that this vacation, we won’t check email. But

then, after a few weeks, or days—or even minutes—we

give in to temptation.

But why?

In his recent paper, “What People Desire, Feel Confl icted

About, and Try to Resist in Everyday Life,” published in

Psychological Science, Wilhelm Hofmann, assistant professor

of behavioral science—along with two colleagues—found

that some desires are harder to resist than others.

“Self-regulation is important for both theoretical and

practical reasons,” the authors wrote. “Yet, the majority of

research on self-regulation occurs in the laboratory.” In order

to better understand the interplay among desire, motiva-

tion, and self-control in everyday life, the researchers used

smartphone experience sampling to closely monitor desire

experiences in a sample of 205 adults over the period of a

week. Using this technique, the researchers collected infor-

mation on more than 7,000 desire episodes in people’s daily

lives, and thus were able to directly compare various human

desires in frequency, strength, confl ict, and controllability

with each other.

Not surprisingly, the single most frequently mentioned

desire was that for food. Desires for nonalcoholic drinks, sleep,

media, leisure, and social contact also made it to the top of the

list. In terms of desire strength, the most potent desires were for

sleep, sex, and social contact, among others. Surprisingly, desires

for substances long considered to be highly addictive—such

as tobacco and alcohol—were among the weakest in average

strength. In terms of confl icting desires, participants reported

having the highest levels of confl ict in regard to leisure activities

and sleep, followed by spending, media use, and tobacco.

Yet, despite the strength and frequency of many of their

urges, participants were generally able to exhibit impressive

rates of self-control in resisting those desires that were expe-

rienced as problematic. But when it came to media desires

(such as watching TV, checking emails, or surfi ng Facebook)

and desires for work—their willpower often faltered.

Professor Wilhelm Hofmann investigates the

temptations we struggle with most, and why

we respond to them in the ways that we do.

Balancing Desire and Self-Control in Everyday Life

Not surprisingly, the single

most frequently mentioned

desire was that for food.


The subsequent research showed

that high-IQ investors are less subject

to the disposition effect, the tendency

to sell winning investments but hold

on to assets that have dropped in

value. These investors are also “more

aggressive about tax-loss trading,

and more likely to supply liquidity

when stocks experience a one-month

high,” the research found. The study

also found that investors with higher

IQ scores “exhibit superior market

timing, stock-picking skill, and trade

execution.”

“It’s difficult to justify why someone

wouldn’t have invested in the stock

market, knowing what a good deal it

has been,” Linnainmaa wrote. “It’s not

just that it may be expensive to buy

stocks and mutual funds, but people

may not have enough knowledge about

them.”—Erin O’Neill

When Brand Loyalty Is Divided

Why does a Bud-

weiser-guzzling couch

potato suddenly

switch to Heineken

when he’s at a cocktail

party with friends?

That’s just what

Pradeep Chintagunta, Joseph T. and

Bernice S. Lewis Distinguished Service

Professor of Marketing, and his co-

author set out to answer in their paper,

“Investigating Brand Preferences Across

Social Groups and Consumption

Contexts, ” published in Quantitative

Marketing & Economics.

Drinkers choose different brands

depending on what they’re doing (for

example, either bowling or sitting on a

They stated, “insider selling is associ-

ated with litigation risk only when

contemporaneous disclosures are

unusually optimistic.”—Dan Kedmey

IQ and Investing ProwessAre smarter people

instinctively bet-

ter investors? For

decades, economists

have debated the root

of the “participation

puzzle,” in strug-

gling to understand why such a small

percentage of the population takes

advantage of stock investments—which

generally produce a higher rate of

return than traditional savings.

Juhani Linnainmaa, associate profes-

sor of finance, and two colleagues

tackled this question in two papers:

“IQ, Trading Behavior, and Performance,”

published in the May Journal of Finan-

cial Economics; and “IQ and Stock

Market Participation,” published in the

December 2011 issue of the Journal of

Finance. The studies found evidence of

a direct correlation between an inves-

tor’s IQ and decisions to invest in the

stock market.

In the first paper, the researchers

collected two decades–worth of scores

from a mandatory army intelligence

test administered to Finnish men who

are required to enlist for nine months

to a year. They analyzed this data along

with records regarding equity return,

trade, and limit-order book data. They

found that higher IQ scores increased

the likelihood of later stock ownership

by 21 percent, even after being con-

trolled for environmental factors such

as wealth, income, age, and profession.

How Word Choice Can Land a Company in Legal Hot Water When a company

discloses informa-

tion to shareholders,

it should watch its

language. An overly

optimistic tone can

expose it to lawsuits

from angry share-

holders, according

to a new paper by

Jonathan Rogers,

associate professor

of accounting, Sarah

Zechman, assistant

professor of accounting, and a colleague

at Ohio State University.

In their study, “Disclosure Tone

and Shareholder Litigation,” which

was published in the November 2011

issue of the Accounting Review, the

researchers used a dictionary-based

measure of optimism in order to

gauge the tone of company statements.

Sued companies used “measurably

more optimistic” language in their

disclosures as compared to peers who

weren’t sued. “These results indicate

a strong link between disclosure tone

and litigation,” the authors concluded.

Further, said the researchers, the

link between tone and litigation

became even stronger when manag-

ers engaged in insider selling that

contradicted the optimism of their

statements. Therefore, according to

Rogers and Zechman, in order to

mitigate legal risk, managers should

avoid overstating the company’s per-

formance, particularly when selling

off their own shares and assets.

Dan

Dry

Jonathan Rogers

Faculty DigestC

hris

Lak

e

Sarah Zechman

Bet

h R

oone

y

Juhani Linnainmaa

IN THE NEWS AND JOURNALS

Chr

is L

ake

Pradeep Chintagunta


couch) and whom they’re with (alone

or among friends). These shifts in

consumption could provide valuable

information to marketers, but the data

for many of these scenarios tends to

be scarce.

Chintagunta and his coauthor

worked around this scarcity by devel-

oping a more parsimonious model

of context-based consumption. The

model reveals that context plays a

powerful role in brand selection.

Smaller companies could increase

their market share by marketing to

a highly-targeted “context or social

group setting.” (Think the Corona-on-

the-beach ad campaign.) Ultimately,

the study suggests “marketers should”

indeed consider how consumers’ prefer-

ences can vary across social group and

consumption context scenarios when

designing their marketing programs.”

—Erin O’Neill and Dan Kedmey

The Consequences of Innovation

There are two sides

to innovation. The

bright side is that

innovative firms are

able to produce more,

which in turn raises

their output, con-

sumption, and wages. The dark side

is that less nimble competitors can be

forced to slash pay and lay off older

workers, who are less able to adapt to

the innovation of the firms. This dark

side, which is called “displacement

risk,” is the subject of a new study by

Stavros Panageas, assistant professor

of finance, and two colleagues.

In their paper, “Displacement Risk

and Asset Returns,” which is scheduled

to be published in the Journal of Finan-

Finding Combinations That Satisfy

In his paper, “The

Combinatorial

Assignment Prob-

lem: Approximate

Competitive Equi-

librium from Equal

Incomes,” published

in the Journal of Political Economy,

Eric Budish, assistant professor of

economics, tackled the problem of

how to design a market-like resource

allocation system in settings where

there are legal or moral restrictions

against using real money to figure

out who gets what. He devised a

new “Competitive Equilibrium from

Equal Incomes” (CEEI) mechanism

that could be applied, for instance, to

course allocation at educational insti-

tutions: which students get to take

the most popular professors’ courses

at Booth? It also could be applied to

shift allocation at companies: which

employees have to work Thanksgiving

or Christmas this year?

cial Economics, and which won the

Best-Paper Award at the Utah Winter

Finance Conference 2011, the authors

measure the magnitude of displacement

risk by looking at consumption data

across generations. The authors find

that, because “innovation benefits the

young at the expense of the old,” growth

firms—which derive a large part of

their value from future inventions—are

a good hedge against displacement risk,

as opposed to less-innovative “value

firms.” Finally, the authors “identify

innovation shocks through their effect

on the consumption of individual

cohorts and show that inter-generation-

al differences in consumption correlate

with the return differences between

value and growth stocks.”—Dan Kedmey

Faculty DigestD

an D

ry

Stavros Panageas

Dan

Dry

Eric BudishThe dark side is

that less nimble

competitors can be

forced to slash pay

and lay off older

workers, who are

less able to adapt

to the innovation of

the fi rms.

Previously proposed

systems for these

kinds of problems,

from both theory and

practice, have

fairness problems,

incentives problems,

or often both.


T The CEEI system works as follows.

First, the participants log their prefer-

ences to a computer program. For

example, taking a particular profes-

sor’s class is worth 100 “utils.” Second,

the program assigns each participant

an equal amount of an artificial cur-

rency—say, 10,000 points, plus a

small random amount extra. Third, a

computer finds a “competitive equi-

librium”—prices such that, when each

participant “purchases” the set of goods

she likes best at these prices, subject to

not spending more than her budget of

artificial currency, the market clears, so

that supply equals demand. The reason

for the random amount of extra budget

in step two is to ensure that competitive

equilibrium prices always exist in step

three. Budish teamed up with computer

scientists at Carnegie Mellon University

to develop a computational procedure

capable of finding these prices.

Budish showed that CEEI is attrac-

tive on three dimensions: efficiency,

fairness, and incentives. Here, effi-

ciency means that welfare-improving

trades aren’t left on the table. Fairness

means that the participants don’t envy

each others’ allocations, or, if they do,

their envy is small: I may envy you

if you get one of the top professors

and I don’t, but you won’t get two of

the top professors while I get neither.

Incentives mean that it is in each

participant’s interest to report prefer-

ences truthfully to the computer in

step one—that is, it is impossible to

“game the system.” Budish argued that

all other previously proposed systems

for these kinds of problems, from

both theory and practice, have fair-

ness problems, incentives problems,

or often both.—Kalliope Dimitrakopoulos

Faculty Digest

Rajan and Weber Appointed to G30

Raghuram Rajan,

Eric J. Gleacher Dis-

tinguished Service

Professor of Finance

and Charles M.

Harper Faculty Fel-

low, and Axel Weber,

visiting professor

of economics, have

been appointed to

the Group of Thirty

(G30), an interna-

tional body that

examines the impact

of financial and economic decisions

in the public and private sectors.

The group also includes Mario

Draghi, president of the European

Central Bank, Mervyn King, governor

of the Bank of England, and other

senior participants from public and

private sectors and academia.

“The effectiveness of the G30

depends fundamentally upon the qual-

ity and stature of the group’s mem-

bers, and our new colleagues bring a

wealth of experience and professional

accomplishment to the group,” said

Dan

Dry

Raghuram Rajan

Cou

rtes

y of

Axe

l W

eber

Axel Weber

“The appointment of

Raghuram Rajan

and Axel Weber to

the G30 is further

recognition of their

stature as leaders in

the fi eld.”

—Sunil Kumar

Jacob Frenkel, chairman of the G30

Board of Trustees. Frenkel is also chair-

man of JPMorgan Chase International.

“The appointment of Raghuram

Rajan and Axel Weber to the G30 is fur-

ther recognition of their stature as lead-

ers in the field,” said dean Sunil Kumar.

“It also shows that Booth’s faculty influ-

ence is growing even stronger in the

public debate over key issues affecting

the world economy.”—Allan Friedman

Cochrane Named Guggenheim Fellow

John Cochrane, AQR

Capital Management

Distinguished Service

Professor of Finance,

has been named a

2012 Guggenheim

Fellow by the John

Simon Guggenheim Memorial Foun-

dation of New York.

He is among 181 scholars, artists,

writers, and scientists who received

the honor this year. The winners were

selected from nearly 3,000 applicants

on the basis of prior achievement and

exceptional promise.

Cochrane’s monetary economics

publications include articles on the

relationship between deficits and

inflation, the effects of monetary

policy, and the fiscal theory of the

price level. The Guggenheim Fellow-

ship was awarded for his further work

on the fiscal theory.

Cochrane has served as an editor of

the Journal of Political Economy and asso-

ciate editor of several journals, including

the Journal of Monetary Economics, the

Journal of Business, and the Journal of

Economic Dynamics and Control. His

recent awards include the TIAA-CREF

Institute Paul A. Samuelson Award for

his book, Asset Pricing, the Chookazian

Dan

Dry

John Cochrane

A W A R D S A N D H O N O R S

Jacob Frenkel, chairman of the G30

(continued on page 15)


BOOTHGEAR

We know a thing or two about getting people to their personal best. Log on to discover our quality Booth activewear and apparel.

Gear up at ChicagoBooth.edu/boothgear.

Get in Gear

In the photo, Lauren Polo Patnaude, ’11.

www.chicagobooth.edu/boothgear


American Academy of Arts and Sciences,

one of the nation’s most prestigious

honorary societies and a leading center

for independent policy research.

They are among more than 200 lead-

ers in business, science, the humanities,

the arts, and other fields to be recog-

nized this year. “Election to the acad-

emy is both an honor for extraordinary

accomplishment and a call to serve,”

academy president Leslie Berlowitz

said. “We look forward to drawing on

the knowledge and expertise of these

distinguished men and women to

advance solutions to the pressing policy

challenges of the day.”—Allan Friedman

Gary Becker, University Professor of

Economics and Sociology

Douglas Diamond, Merton H. Miller

Distinguished Service Professor of Finance and

Richard N. Rosett Faculty Fellow

Eugene Fama, Robert R. McCormick

Distinguished Service Professor of Finance

Robert Fogel, Charles R. Walgreen

Distinguished Service Professor of

American Institutions

Reid Hastie, Robert S. Hamada Professor of

Behavioral Science

Kevin Murphy, George J. Stigler Distinguished

Service Professor of Economics

Raghuram Rajan, Eric J. Gleacher

Distinguished Service Professor of Finance and

Charles M. Harper Faculty Fellow

Richard Thaler, Ralph and Dorothy Keller

Distinguished Service Professor of Behavioral

Science and Economics

Robert Vishny, Myron S. Scholes Distinguished

Service Professor of Finance

Bertrand and Zingales elected to American Academy of Arts and Sciences

Marianne Bertrand, Chris P. Dialynas

Professor of Economics and Richard

N. Rosett Faculty Fellow, and Luigi

Zingales, Robert C. McCormack

Professor of Entrepreneurship and

Finance and David G. Booth Faculty

Fellow, have been elected fellows of the

Endowed Risk Management Prize, and

the Faculty Excellence Award for MBA

teaching.—Allan Friedman

Hofmann Wins Early Career Award

Wilhelm Hofmann,

assistant professor of

behavioral science,

received this year’s

2012 Social Cogni-

tion Early Career

Award, which rec-

ognizes contributions to the study of

social cognition by junior scientists. It

was presented to him by the Interna-

tional Social Cognition Network.

Hofmann has received several other

awards in his burgeoning career, includ-

ing the 2009 William Stern Award of

the German Psychological Society, and

the 2010 Distinguished Young Scientist

Award (Heinz-Maier-Leibnitz Award)

of the German Science Foundation.

His work has appeared in numerous

psychological journals, including Psy-

chological Science and the Journal of

Personality and Social Psychology. His

work has also been featured in Scientific

American Mind, Discovery News, the

New York Times, Financial Times, the

Guardian, the Telegraph, and Forbes, as

well as many broadcast outlets includ-

ing ABC, NBC, CBC, and Fox News.

Hofmann also serves on the editorial

boards of Social Psychological and Per-

sonality Science and the European Jour-

nal of Personality.—Kate Ancell

Faculty DigestD

an D

ry

Wilhelm Hofmann

Bet

h R

oone

yMarianne Bertrand

Chr

is L

ake

Luigi Zingales

Among Their PeersBertrand and Zingales join nine other Booth faculty who earlier were elected fellows of

the Academy of Arts and Sciences

(continued from page 15)


JOHN HEATON Joseph L. Gidwitz Professor of Finance

Award Winner

Hoover Institution National Fellow (1993–94)

Sloan Foundation Fellowship (1993–95)

National Science Fellowships (1993–98)

Specializes in

asset pricing, portfolio allocation, and time-

series economics

Teaches

investments, fi nancial instruments, and

topics in empirical fi nance

Previous Education

PhD in economics, University of Chicago

MA in economics, University of

Western Ontario

BA in commerce, University of Windsor

Feature Capital Ideas


This article was originally published in the May 2012 issue of Capital Ideas,

a publication highlighting faculty research at Chicago Booth. This issue

featured selected papers on investment management. For more information, visit

ChicagoBooth.edu/CapIdeas

Mat

thew

Gils

on

By Vanessa Sumo

Fundamental economic variables regain importance in explaining risk premiums in stock markets

Consumption

Strikes Back

When investors think about the risk of investing

in the stock market, one of the things they pay

attention to is how stocks and the underlying

earnings of companies are affected by movements in the

economy. Stocks that closely follow the ups and downs

of business cycles are considered riskier, because these

stocks will typically fall at the fi rst hint of a downturn

and rise faster as the economy recovers. From the

investors’ perspective, then, stocks of companies whose

earnings are most affected by economic conditions

should promise a bigger return.

The high returns observed in the stock market would

therefore suggest that its performance is strongly related

to business cycles. Indeed, many people think that an

economic recession goes hand in hand with a bear market.

However, John Heaton, Joseph L. Gidwitz Professor of

Finance, says this often has not been true in the past.

“There have been a lot of settings where stocks have come

down but the economy has not moved,” says Heaton. Why,

then, would investors demand high risk premiums in the

stock market?

Perhaps equally baffl ing is why value stocks, which are

stocks with low market values relative to the fundamental

factors that determine their price, have had consistently

higher returns than growth stocks, which are stocks

whose earnings are expected to grow rapidly. This

difference in average returns arises even though the

returns on both types of portfolios are about equally

correlated with business cycles. It is unclear from simply

looking at the correlation between the returns of different

portfolios and the state of the economy why investors

would ask for a higher return for holding value stocks.


Feature Capital Ideas

These puzzling observations have overlooked the fact that

investors are concerned not only about the impact of short-

term fl uctuations in business cycles on stock prices, but also

about how an uncertain economic future might affect their

investments, according to a recent paper by Heaton, Lars Peter

Hansen, a professor in the Department of Economics at the

University of Chicago, and Nan Li, a professor at National

University of Singapore, titled “Consumption Strikes Back?

Measuring Long-Run Risk.” In particular, a decline in the

stock market today may refl ect an underlying shock to the

economy that will not dissipate quickly and will have an

impact over a long horizon.

“Maybe what’s really happening is that when the stock market

goes down today, investors think that this is telling them a lot

about the state of the economy in the future,” Heaton says. If

investors perceive that economic conditions will be worse in

the future, then investors will likely ask for a higher return on

stocks today to compensate them for that higher risk.

Measuring Long-Run Risk

Hansen, Heaton, and Li develop a theory that captures long-

run risk, or the risk that arises from the uncertainty about

the long-run growth of the economy. They show also how

to appropriately measure the relationship between current

stock market returns and future economic conditions—a

relationship that leads to differences in required returns.

Under this theory, stocks that have higher predicted required

returns should have lower prices to refl ect the additional

return needed to persuade investors to buy those stocks.

An economic downturn can raise uncertainty about the

pace of future economic growth in several ways. For instance,

a number of people who lose their jobs in a recession will not

fi nd work again and will leave the labor force, permanently

reducing the economy’s productive capacity. Other bad

shocks that investors may see as threats to future economic

growth include a widening government defi cit that raises the

prospect of higher taxes in the future or a recession that makes

politicians feel more protectionist in terms of international

trade. As a result, a recession today can make investors think

hard about the risk that the economy may no longer return to

its long-run growth path.

Hansen, Heaton, and Li use their theory to understand

whether an exposure to long-run risk can help explain the

difference in returns of value and growth portfolios. In

particular, if the cash fl ows generated by value stocks are more

highly correlated with future economic conditions compared

with those of growth stocks, then investors would demand a

higher return to hold a value portfolio that they perceive to

have a higher exposure to long-run risk.

Indeed, the study fi nds that the cash fl ows of value portfolios

are strongly correlated in the long run with macroeconomic

shocks, while growth portfolios show little correlation. The

results confi rm the authors’ argument that investors are

concerned not just about the short-term impact of business

fl uctuations, but also about how these disturbances will affect

economic prospects years from now. Investors see the long

run as an important source of risk, which they consider when

accepting a price for the assets they buy.

“When the stock market goes down today, investors think that this is telling them a lot about the state of the economy in the future.” —John Heaton


Consumption Makes a Comeback

Before Hansen, Heaton, and Li’s study, researchers had

somewhat abandoned the idea that stock prices largely refl ect

the relationship between the aggregate economy and the stock

market. The economic models that researchers typically use did

not adequately explain the consistently high equity premiums

observed in the data, leading academics toward behavioral

biases and transactions costs to account for this shortcoming.

But by fi guring out how to accurately measure long-run

risk, Hansen, Heaton, and Li have made it possible for

fundamental economic variables to once again play a key role

in determining asset prices. That’s the story behind the paper’s

title. “What we’re saying is that using fundamentals like

consumption to measure risk can actually work if you look at a

longer horizon,” says Heaton.

Consumption is the largest component of gross domestic

product and is an important indicator of economic well-

being. By looking at the correlation between stock returns and

expected future consumption, Hansen, Heaton, and Li were

able to come up with a measure of long-run risk that—when

linked to the economic shocks that investors see today—

proves that fundamentals can indeed drive risk premiums in

the stock market. ■

“Consumption Strikes Back? Measuring Long-Run Risk.” Lars Peter

Hansen, John Heaton, and Nan Li. Journal of Political Economy,

April 2008.

To watch a video of John Heaton explaining his research, visit ChicagoBooth.edu/CapIdeas

“Using fundamentals like consumption to measure risk can actually work if you look at a longer horizon.” —John Heaton

www.chicagobooth.edu/capideas/may-2012/heaton.aspx

Chicago Booth Magazine Summer 201220 Chicago B

Feature Critical DDiiaalogguuesis a series of conversations with members

of the Chicago Booth community who

play key roles in shaping business and

economic policy worldwide.

In early 2003, following the internet boom, Scott Griffi th, ’90, had the experience of running two start-ups

under his belt and was looking for his next endeavor. He was intrigued by Cambridge, Massachusetts–based

Zipcar, the young company that pioneered the big idea of car sharing. The concept was simple. In large

cities, where car ownership was costly, Zipcar members could rent a Honda Civic or a Volkswagen Beetle to

run errands or head for a weekend getaway, all for much less than the cost of a conventional car rental. And

the venture was irresistibly green. Reducing the number of vehicles downtown would lower pollution, parking

demand, and gridlock.

But the company was ineffi cient and losing money, so when Griffi th stepped in as chief executive, he applied

the kind of rigorous data-driven analysis he fi rst learned at Booth. He nurtured a performance-based culture,

launched hyper-local marketing campaigns, expanded the vehicle fl eet, and targeted new markets, growing

the company to 18 metropolitan areas and 250 college campuses. He also broadened the appeal of the brand

from utilitarian to fun.

Membership at Zipcar has grown to more than 700,000, and the company boasts a fl eet of more than

9,000 vehicles, not just Civics, but Mini Coopers, BMWs, Fords, and even hybrid and all-electric vehicles.

The company went public in April 2011 and its stock is traded on the NASDAQ under the symbol ZIP.

Griffi th recently discussed his Zipcar journey with dean Sunil Kumar in a Critical Dialogues conversation.

20 Chicago Booth Magazine Summer 2012

Edited by Judith Crown | Photos by Matthew Gilson

21Summer 2012 Chicago Booth Magazine 21Summer 2012 Chicago Booth Magazinegazine

Kumar: When you were fi rst recruited to join the team at Zipcar,

what attracted you to the company’s idea and business? What

were some of the things you considered in making the decision?

Griffi th: I like to think of Zipcar as my own personal sweet

spot because it brought together three of my passions:

innovation, transportation, and cities. I grew up in Pittsburgh

and saw the incredible impact that innovation and technology

had in turning that city around after the death of the steel

industry. I had moved back to Boston after running two

internet start-ups. I was a cancer survivor, and I wanted to do

something that made a difference. In 2002, I started watching

Zipcar and saw a huge idea. When I was offered the CEO role

in early 2003, I knew I was taking a tremendous risk, but I

loved the vision.

Kumar: What kinds of changes did you have to make to move

the company forward?

Griffi th: We’ve been able to build the brand by being very

specifi c and deliberate in our business model and the processes

for everything from fl eet management to hyper-local marketing.

For example, when I arrived, there was a move afoot to do a

major media buy to place ads on trains and in bus shelters.

It didn’t go well because you can’t explain what Zipcar is

about on a bus ad. But out of failure came a better idea—very

localized zone marketing. We created print materials that

we placed in card holders at dry cleaners and cafés. We put

grassroots marketers on the sidewalks with collateral. I even

rode through neighborhoods on a fl atbed semi with Zipcars on

it and used a bullhorn to explain what Zipcar was about.

Also, when I joined the company, we had 60 cars in New York

City, but they were spread out, so effi cient marketing was

diffi cult. We moved all the cars to the Chelsea area, a hip, young

neighborhood in lower midtown, where we were able to target

our message. At the time, we were growing at a 15-percent rate,

but when we focused on Chelsea with our concentrated fl eet and

hyper-local marketing approach, our membership tripled in a

month and a half. That was a goose-bump moment.

Kumar: Did you have to change the brand’s positioning?

Griffi th: At the start the image was too basic, too green. We

offered mostly white or silver Honda Civics and VW Beetles.

To reach a broader audience, we needed to offer more variety

and make the brand about lifestyle. In 2004, we started adding

colorful Mini Coopers, Mazdas, and BMWs, even SUVs. That

generated some good press and expanded the appeal to a much

broader audience of users.

Kumar: Why did you make the decision to go public last year?

Griffi th: Although we went public last year, the strategy was

set years earlier when we decided to be a global company. The

car-sharing business traditionally has been divided into two

camps: smaller local operators with a tight geographic focus,

“When we focused on Chelsea with our concentrated fl eet and hyper-local marketing approach, our membership tripled in a month and a half. That was a goose-bump moment.”—Scott Griffi th


Chicago Booth Magazine Summer 201222 ChChicago BBoooth Magagazine SuSummer 220122222 Booth Mag

Feature Critical Dialogues

and larger global companies like Zipcar with operations in many

cities. The capital needs for each model are incredibly different.

We knew that to achieve our long-term business goals we would

need a funding model that involved the public markets given the

asset intensity of the business. While we don’t necessarily need

a lot of equity capital, going public has enhanced our ability

to tap more deeply into the asset-backed securities market to

support our fl eet growth with a low-cost leveraged model.

Kumar: What has been the biggest challenge for you and the

company since going public last year?

Griffi th: On a personal level, becoming a public company

CEO has challenged me to step up my game. The bar has been

raised and so have the expectations of many more people. I’ve

needed to get better at time and team management. No CEO

has extra time in the day to spend doing something new. You

have to fi gure out, what do I need to hold onto, and what can I

delegate to others on my team?

Kumar: Has the emphasis on quarterly earnings affected the

way that you and your team manage the business?

Griffi th: To some extent, yes. As a private company, you talk to

small groups of investors in business meetings. We now have

a much larger group of shareholders in the public market to

whom we have a fi duciary duty. They can be pretty focused on


“We knew that to achieve our long-term business goals

we would need a funding model that involved the public

markets given the asset intensity of the business.”

—Scott Griffi th


the short term, so we’re trying to make sure they understand

our strategy of investing for long-term category leadership. You

have to get consistent messages across in one or two sentences

through the media; I’m learning the art of the sound bite.

Kumar: Car sharing makes a lot of sense, especially for city

dwellers and college students. But the model is still young.

What will it take for sharing to become mainstream, and

when do you expect that to happen?

Griffi th: With more than 700,000 members—including

governments and businesses—sharing nearly 10,000 cars

in the US, Canada, the UK, and Spain, I’d say that Zipcar is

moving into the mainstream. With 10 million people who can

walk to a Zipcar in less than 10 minutes, we have substantial

room for growth in our existing markets, but compared to

when I took the wheel in 2003, this industry is no longer

considered a niche play.

Kumar: How do you stay in touch with your customers?

Griffi th: I think both members and employees believe that we

are all part of something much bigger than ourselves. So we

engage with our customers, whom we call Zipsters, virtually

and physically. As a global company, we strive to maintain a

local appeal, with storefront offi ces in our major cities where

Zipsters can meet employees for business and social purposes.

For instance, our San Francisco offi ce has frequent events

where members can play Xbox, foosball, and other games with

employees at the offi ce. We also have an active social media

program, with Twitter, which has more than 30,000 followers,

and Facebook, which has more than 100,000 likes.

We’re big believers in the Net Promoter Score, in which

customers rate their experience on a scale of 1 to 10, and

we use this feedback loop extensively to track and measure

customer satisfaction and loyalty. If there are detractors, we

call them to fi nd out what happened and what we can do

better. Sometimes I call them personally.

Kumar: What are the challenges of your business model that

still must be overcome? In particular, how do you plan to

improve profi tability?

Griffi th: There have been a lot of questions about the

profi tability of our model. Zipcar previously has reported that

it expects to be profi table on a GAAP basis for 2012. In our

established markets, our fi rst four cities of Boston, New York,

Washington DC, and San Francisco, Zipcar achieved 22-percent

growth in 2011 while producing earnings before tax of

23 percent of revenue. We have a long-term business model

that gets us to a very exciting corporate margin structure as we

scale the global operation.

We learned early on that the model could be profi table. In July

2004, a young controller came into my offi ce with results from

Boston, New York, and Washington DC. They were all bottom

line positive. That was a game-changing moment, when we

learned we could make money in individual cities. That’s when I

knew we could attract venture capital investors.

Kumar: Some worry that deep-pocketed competitors will come

along and dominate the market. How do you defend against that?

Griffi th: We think that larger companies getting into the

space validates what we’ve known for years: that car sharing

is a multibillion dollar opportunity. But car sharing is

2011 revenue: $242 million

Membership: 700,000

Fleet size: 9,000 vehicles

Metro areas: 18

College campuses: 250

$

Zipcar at a glance


Feature Critical Dialogues

2000Entrepreneurs Antje Danielson

and Robin Chase start Zipcar.

2003Scott Griffi th replaces

Robin Chase as CEO.

2004Company expands fl eet;

core cities of Boston,

New York, and Washington

DC turn a profi t.

2005Zipcar raises $10 million

in its fi rst venture capital

round from investor group

led by Benchmark Capital.

fundamentally different from car ownership and car rental, in

much the same way that streaming video on a smartphone is

fundamentally different from renting DVDs at a store. Zipcar

pioneered the category in the US and we continue to lead it.

With our fi rst-to-scale advantage, our unparalleled knowledge

base, a brand that has become synonymous with the category,

and a fantastic team, we’re in a great position.

Kumar: You have a relatively new partnership with Ford

Motor Co. Can you share any lessons of how a young,

small company can develop strategic relationships with an

establishment icon?

Griffi th: We share a vision of the future of mobility. Bill Ford

himself said a few years ago that he believes the future of

transportation would be a mix of privately owned cars, public

transit, and Zipcar. In this venture, we both brought something

to the table. Ford brought some great vehicles and a willingness

to help accelerate adoption of car sharing on campuses, and

we brought a powerful brand among millennials and urban

dwellers, as well as our decade of experience in car sharing. I

don’t think we would have been able to do this deal fi ve years

ago given our size and reach and the overall state of the industry.

Timing plays a big role when smaller companies want to do

deals with large global players. They’re looking for reach and we

had to achieve some scale before we could offer that to a partner.

Kumar: What are some of the lessons from your Booth years

that still resonate?

Griffi th: You have to do the math and get the business model

right. And one way to do that is to follow the Booth approach,

using data to drive decision making. This is an enduring lesson.

And Zipcar certainly is a treasure trove of data. How many cars

do you need in a city to make money? In the beginning, the staff

didn’t know. How many people are needed to run the business?

What is the cost to acquire a new member?

Professor Harry Davis was inspiring to me, given the impact of

his insights on the critical importance of product development

and on how customer research and data can drive great

products. Of course, he built on that platform with his

research on the importance of leadership development—how

great leaders lead great companies and develop great cultures.

Kumar: How do you recruit and retain top talent?

Griffi th: Zipcar is an innovative, disruptive technology

company, and, as such, we look to hire innovators and

leaders capable of thinking about the traditional issues of car

ownership—congestion and sustainability—in nontraditional

and innovative ways.

I think the biggest reason people come to and stay at Zipcar

is because they share our vision and are motivated by our

mission. They want to be a part of something that is larger

than themselves. People come to work at Zipcar because they

feel passionately about our values, are proud of the brand, and

want to see Zipcar succeed. Employees know that they can

have an impact, and that is meaningful. Of course, rewards

do matter—pay and benefi ts, stock options, and long-term

The road to an IPO


2007Zipcar acquires Seattle-based

rival Flexcar.

2008Company announces member-

ship has doubled in past year

to 225,000.

2010Company fi les with SEC for

initial public offering.

2011Zipcar acquires London-based

Streetcar; raises $174 million

in an IPO and begins NASDAQ

trading on April 14.

incentives are important factors. But if they are the primary

motivators, it’s a red fl ag for me.

Kumar: What entrepreneurs or business leaders do you most

admire and why?

Griffi th: We live in a world where genuine leadership and high

integrity are the hallmarks of great CEOs. CEOs with these

qualities are ones that I tend to admire. Jeff Bezos, with his

long run revolutionizing retail, online commerce, and brand

building, is inspirational. I think Ford is one of the greatest

turnarounds and one of the most interesting business success

stories of the past decade. I admire Bill Ford’s and Alan

Mulally’s vision, guts, leadership, and business acumen.

Kumar: What do you read for business—websites and print

publications, including business books? What do you read

to unwind?

Griffi th: I am constantly reading periodicals such as Fortune,

Bloomberg Businessweek, the Wall Street Journal, Time, and

Wired, probably to a fault. My team will tell you their inboxes

are full of links to articles

I fi nd interesting. If I

read business books,

they tend to be on or

about great leaders. I

thought Walter Isaacson’s

biography of Steve Jobs

was interesting. Other

than that, I’m reading

a lot about big data. I really liked Thinking Fast and Slow by

Daniel Kahneman. As for unwinding, believe it or not, I enjoy

reading about vintage cars and browsing them on eBay. If you

grew up in the late 1970s

in Pittsburgh—or maybe

anywhere in the US—you

know what I’m talking about!

Kumar: What keeps you up

late at night?

Griffi th: I think the biggest

thing for me right now is how to take what has made us successful

and extend it as the company grows. The culture we developed

during the past decade as well as our relentless focus on the

member experience has made us successful. We’ve got to fi nd a

way to keep this intact as we expand our global footprint. So, how

do we foster and keep the company culture across a broader and

broader set of operations and geographies; but also, how do we

continue to fi nd and recruit new team members globally that can

help us execute?

Looking back over the past nine years, we’ve seen Zipcar grow

something like 7,000 percent. I know that I can’t keep up with

this if I’m only growing at 15 percent per year. I know I have

to up my game through developing self-awareness and self-

innovation. I fi nd that the wee small hours of the morning are

a good time to take stock of myself, my work, and some of the

things I need to do to be a better leader. Self-innovation is the

most important innovation of all. ■


Feature 60th Annual Management Conference


THE ELUSIVE COURSE TO ALTERNATIVE FUELSBy Rick Popely | Photos by Matthew Gilson

US motorists won’t be abandoning the gas station for battery chargers

anytime soon, industry experts agreed in a keynote panel that considered

the future of transportation.

Internal combustion engines and petroleum-

based fuels will dominate transportation for

decades to come for a compelling reason:

the gas tank on a Toyota Prius weighs about

40 pounds, takes fi ve minutes to fi ll, holds

enough energy to travel 400 miles, and costs

$400 to manufacture. The battery to power

an electric car, on the other hand, weighs

more than 800 pounds, requires several

hours to recharge, travels 100 miles, and

costs 25 times more to make.

Chevron Corp.’s Michael Wirth (left) said that

it will take decades to reduce dependence

on conventional fossil fuels, just as today’s

energy market took a century to evolve and

trillions of dollars of investment.


deliver more effi ciency than any

other alternative. The energy density,

portability, and shelf life of a gallon

of gasoline “beats everything else

by a long way,” Wirth explained.

When it comes to fueling everyday

transportation, it is a matter of

thermodynamics and physics.

Vehicles have to provide utility

and convenience for the owner—and

be affordable—he added, and fi lling

passenger or cargo space with a battery

or a fuel tank for hydrogen or natural

gas runs counter to that philosophy.

“The reality is, most people buy a

vehicle for utilitarian reasons, and if

they can’t get the stroller in the trunk,

that car’s not very useful,” Wirth said.

“I think the real challenge is recognizing

that these technologies ultimately have

to serve the customer.”

Though neither panelist saw a

revolution in transportation technology

on the horizon, they agreed that cost-

competitive alternative vehicles and

fuels will emerge over time. In the

meantime, they said, government’s role

should be to promote research that will

group for Toyota Motor Sales, USA, Inc.,

in Torrance, California.

Driverless cars aside, Reinert said

he does not see customer demand for

electric cars outside of urban areas.

“We’re going to be using oil and gas

for quite a while—decades out. I know a

lot of people thought that batteries were

going to work, but if you try to make a

business case for a pure, battery-electric

car, it’s really, really tough,” Reinert said.

To underscore the diffi culty of

bringing electric vehicles (EVs) to

market, Reinert discussed plans for

Toyota’s RAV4, a battery-powered

SUV that the automaker will sell

initially in California and then offer

in other states if demand warrants.

The base price of the RAV4 EV is

$49,800—twice that of the Prius—

and Toyota has set a sales goal of just

2,600 units over three years. Toyota

sold nearly 61,000 gas-powered Prius

hybrids in the United States in the

fi rst three months of 2012 alone.

Wirth said that petroleum fuels

will dominate transportation for

the foreseeable future, because they


This was the assessment of Toyota

engineer Bill Reinert during the 60th

Annual Management Conference

keynote panel, a wide-ranging discussion

that also covered the prospect of reducing

greenhouse gas emissions, the infl uence

of world economic growth on energy

consumption, and the government’s

role in energy policy.

This year, 600 alumni, students,

and business leaders gathered at the

Hyatt Regency Chicago for the keynote

presentation on May 11, while hundreds

more viewers from 39 countries watched

a live simulcast of the event. Breakout

sessions at Gleacher Center continued

the day’s dialogue on business topics,

which included an evaluation of US tax

policy (see page 30) and an examination

of the use of data in understanding

consumer behavior (see page 33).

Moderator Robert Topel, Isidore

Brown and Gladys J. Brown

Distinguished Service Professor in

Urban and Labor Economics, prodded

panelists Reinert—a member of the

team that developed the Prius—and

Michael Wirth, executive vice president

of downstream and chemicals for San

Ramon, California–based Chevron

Corp., to explore the prospects for

Jetson-style fl ying cars and vehicles that

drive themselves. Reinert and Wirth

served with Topel on the National

Petroleum Council, a task force that

studied the future of transportation and

fuels in the United States.

According to Reinert, earthbound

vehicles are here to stay.

“As long as there’s a three-ton pickup

with a drunk behind the wheel, there’s

going to be liability issues with an

automated car,” said Reinert, national

manager of the advanced technology


lead to innovation, rather than to dictate

what people should drive or use for fuel.

In California, for instance, a state

mandate for zero-emission vehicles has

pushed automakers to roll out several

“It’s extraordinarily frustrating to work as

collaborators with US science right now,

because of the cycles of funding.”

—Bill Reinert

Left: more than 600 guests gathered for the keynote session at the Hyatt Regency Chicago;

Toyota’s Bill Reinert (top) said research on alternative fuels depends on uncertain funding

from Washington; moderator Robert Topel (above) posed the question whether Jetson-style

fl ying cars are in the future.

EV models. As many as 10 other states

have similar emissions regulations and

could adopt the same rules. In addition

to designing EVs, manufacturers plan

to meet these mandates with plug-in

hybrids that run on battery power

for short distances—so-called

partial zero-emission vehicles—

and with hydrogen-powered fuel-

cell vehicles.

Instead of setting the industry

standard, government should

identify targets and give industry

the latitude to meet them, the

panelists said. “Picking winners in

technology, even if government were

completely uninfl uenced by interest

groups, is damn hard,” Wirth said.

Rather, government should provide

ample and sustained funding

through its national laboratories

to support basic research into

technologies that will help reduce

fuel consumption and greenhouse

gas emissions. These initiatives

include developing alternative fuels,

such as hydrogen; refi ning fuel

manufacturing and distribution

systems; and fi nding weight-saving

materials for vehicles.(continued on page 31)



The corporate tax system in the United States is such a disaster

that tax attorneys routinely tell student entrepreneurs to

start their businesses offshore. As a result, multinationals are

investing outside the country’s borders, which suppresses

economic growth at home.

“Do not develop your international capital in the US. Get

free of these onerous tax policies,” said Merle Erickson, professor

of accounting and moderator of the breakout session panel on

corporate tax policy. “This is the advice we’re giving to our best

business developers in this country.”

With that as prologue, three corporate tax experts delved

into the technical problems that the US tax code presents to

large enterprises.

“We would take the tax system of any other country over the

tax system we have,” said David Lewis, vice president for global

taxes at Eli Lilly & Co. in Indianapolis. The nominal corporate

tax rate of 35 percent is too high to be competitive with other

advanced countries, he asserted. In addition, US tax law is too

convoluted. It allows double taxation on foreign income, and it

discourages spending on research and development, a vital issue

for the pharmaceutical industry, he said.

The present tax system is the product of a compromise made

between the Kennedy administration and Congress in 1962, said

Rod Donnelly, a partner with Morgan Lewis, LLC, in Palo Alto,

California. It was suboptimal from the start, he said, and has

only gotten worse. US trading partners around the world have

reduced and reformed their corporate income tax structures;

Canada, for instance, makes it a deliberate policy to undercut

US corporate tax rates, Donnelly said.

In 1981, the statutory US tax rate was roughly even with that

of the rest of the countries in the Organisation for Economic

Cooperation and Development (OECD). “Over time, we’ve

become the last high-rate jurisdiction out there,” said Jeff

Maydew, a partner at Baker & McKenzie, LLC in Chicago. The

huge tax burden inhibits multinationals from repatriating

foreign-earned income. To avoid the taxes, fi rms have preferred

to let $1.2 trillion in offshore earnings pile up abroad, money

that won’t be invested in the domestic economy.

Lewis noted that the United States lags in subsidizing

research and development through tax incentives, registering at

24 among 38 of its trading partners. The rest of the world seems

to understand the importance of such government support.

Other countries set lower rates and “allow capital to be deployed

around the world as a business sees fi t.” By doing so, “they

incentivize innovation,” Lewis said.

The United States instead has pursued inconsistent and

dilatory policies, the panelists agreed, and they acknowledged

that it is diffi cult to operate in such a climate of uncertainty.

The tax credit for R&D has expired 14 times and been extended

13 times during its 30-year history, Donnelly noted. President

Obama has proposed expanding the benefi ts of the credit and

making it permanent. Lewis noted that the tax credit funds jobs,

but Lilly is under competitive pressure to locate R&D functions

in countries where the payoff is higher.

The panelists agreed that the country’s need for increased

revenue can be met only if the tax code becomes fairer, more

balanced, easier to administer, and less punitive toward

crossborder economic activity.

But they were not optimistic that tax reform will happen

quickly—or rationally. In Washington, the conversation focuses

on revenue neutrality, said Lewis, who is part of a working

group that talks regularly to members of Congress.

Making matters worse are the enormous costs of compliance

with the technical peculiarities of US law. Many international

fi rms evince “a visceral dislike to touch the US tax system,”

Maydew noted. Large multinationals have as many as 1,000

in-house tax experts, he added, and companies’ efforts to keep

those positions staffed are “sucking in some of the most talented

students” from the United States and abroad. “Should the best

and brightest be coming to the US to help us solve this self-

infl icted wound?”

Unfortunately, the transformational leadership needed to

pilot this issue through the political process is nowhere to be

seen, Lewis observed. “Instead of rising to the occasion and

having a thorough public debate around how we should change

our policies, we’re erecting walls and barriers, trying to hang on

to what we have, based on laws that were passed in the 1960s.”

—Duncan Moore

TAX CODE NEEDS AN OVERHAULExperts agree high corporate rates discourage investment


Topel asked about the likelihood

of meeting an Obama administration

goal of cutting in half greenhouse gas

emissions from transportation by 2050.

Both panelists agreed that the target

is unrealistic.

Wirth predicted that global energy

demand will grow by 40 percent over

the next 20 years, a boom that will

increase worldwide greenhouse gas

emissions. Today, there are about 830

million vehicles in use globally, and the

International Energy Agency predicts

that the total will triple by 2050 as

personal vehicle ownership soars in

countries such as China and India.

“There are about two billion people

on the planet that are the emerging

middle class in some of the developing

economies, and all they want is the

lifestyle that you and I take for granted,”

Wirth said. The increase in demand

from developing nations will more

than offset gains made by reducing

greenhouse gases in the United States

and other developed nations.

The problem, under the current

system, is that funding for such

research can be turned on and off

annually, based on politics and on

who is in charge in Washington.

“It’s extraordinarily frustrating to

work as collaborators with US science

right now, because of the cycles of

funding,” Reinert said, pointing to

annual budget battles in Congress. “If

we could fi x that and lay out a fi ve-year

plan of ‘this is what you’re going to get,’

we could do so much better.”

Left: experts at the breakout session on

corporate tax policy agreed that the US tax

code must become fairer, more balanced,

and easier to administer. The three panelists

(from left) were David Lewis, Rod Donnelly,

and Jeff Maydew.

The reality is, most

people buy a vehicle

for utilitarian reasons,

and if they can’t get

the stroller in the

trunk, that car’s not

very useful.”

—Michael Wirth

(continued from page 29)

“


a demonstration fl eet of about 100

vehicles. Reinert estimated he gets the

equivalent of 60 miles per gallon from

gasoline and predicted that hydrogen

would cost about the same as paying

$5 to $6 per gallon of gas. Although

the cost of fuel-cell cars and the lack

of fueling stations are obstacles, he

predicted hydrogen cars could start to

make an inroad by 2020.

Reducing dependence on petroleum-

based fuels will be challenging, simply

because the energy market is enormous:

the world uses the equivalent of 300

million barrels of oil daily to satisfy its

energy needs. It will take decades to

develop viable alternatives.

“The system that we have today took

over a century to evolve and trillions

of dollars of investment,” Wirth said.

“We will transition off of hydrocarbons.

It’s inevitable. The question is when

and how. It will happen gradually,

and it will happen through sustained

investment in research, development,

and technology.” ■

To watch video of the

keynote panel and breakout

sessions, go to ChicagoBooth.edu/

mc12coverage

wind, biofuels, and geothermal, which

represent 1 percent of the energy supply

today—are expected to grow to about

3 percent in 20 years.

As energy companies continue to

search for new energy sources, the auto

industry will focus on making internal

combustion engines more effi cient,

Reinert said.

The average car today is about 17

percent effi cient, meaning that is how

much of the energy from the gas tank

gets to the wheels that drive the car.

A Prius hybrid is about 34 percent

effi cient. Reinert predicted that a

decade from now, engines will be two

to two-and-a-half times more effi cient

than they are currently. In addition,

weight reduction in vehicles, through

materials and design changes, will

improve fuel economy.

Fuel-cell vehicles, which convert

hydrogen and air to electricity, and

which emit little or no harmful

emissions, also show promise, Reinert

said. Toyota plans to offer a hydrogen-

powered fuel-cell vehicle globally in

2015, and other manufacturers have

similar plans.

Reinert currently drives a Toyota

Highlander SUV that was converted

to hydrogen fuel-cell power from a

gasoline engine. The car is part of

To prepare for a future with

escalating worldwide energy demand,

the United States requires a reliable,

affordable, and diverse energy supply.

Although there are dire predictions

that the world soon will run out of

oil, the development over the past 20

years of hydraulic fracturing, which

makes it possible to drill deeper and

horizontally, as well as vertically, has

led to the discovery of oil reserves

that previously were unreachable,

Wirth said. That has been “the single

biggest technology breakthrough”

for the energy industry, and has

increased the world’s recoverable oil

reserves by 30 percent, enough to last

70 to 80 years, while simultaneously

boosting oil and natural gas

production in the United States.

“We are running out of oil, but peak

oil is a long way out from a technical

and economic standpoint,” he said.

Though neither panelist identifi ed

an energy source that is likely to

displace oil as the dominant player

in transportation, both said that

hydrogen, along with compressed and

liquefi ed natural gas, could become

more prominent sources of fuel. Wirth

expressed doubt that renewable energy

would be a major part of the mix

any time soon. Renewables—solar,


www.chicagobooth.edu/mc12coverage


Retailers and consumer goods marketers are blessed with

buckets of data. They can discern what consumers are buying

based on credit card usage, customer loyalty programs, and

internet purchases.

But that data does not explain why consumers act the way

they do. Some grocery shoppers shun prepared meals because

they prefer to cook with fresh meats and vegetables. Others prefer

store labels because they are less expensive than national brands.

Still others hew to brands that tout healthy ingredients.

Lessons that can be learned to better understand consumer

behavior were the focus of the breakout session on the use

of syndicated consumer packaged goods and retail data.

Moderator Erik Hurst, V. Duane Rath Professor of Economics

and John E. Jeuck Faculty Fellow, asked the panelists to

provide insight into how data is accumulated by marketers and

how it is used to understand the way shoppers act.

The true test, according to the panel of Booth alumni with

expertise in retail and consumer marketing, is to analyze the data

and draw the right conclusions. “There is no shortage of data,”

said James Dodge, ’93, vice president and managing director at

New York consumer research giant The Nielsen Company. “The

challenge is clarity on the issues and outcomes.”

Dodge and his fellow panelists agreed that while retailers

and consumer packaged goods manufacturers have

become adept at collecting data on who is buying what, the

information does not provide an immediate understanding of

why a consumer makes a particular purchase.

“There is a difference between behavior and insight. The data

is very important to identify the behavior, but I would encourage

marketers to keep trying to peel the onion back and get to the

deeper motivation,” said Howard Brandeisky, ’85, vice president of

global marketing and innovation for John B. Sanfi lippo & Sons,

Inc., a nut and snack producer based in Elgin, Illinois.

To gain deeper insight into consumers’ buying decisions,

Brandeisky said he has accompanied shoppers to the grocery

store to conduct “shop-along ethnographies.”

“You can see in real time how consumers are reacting to

stimulus in the store. You can see what’s on their list, what’s

not on the list. What they buy on impulse. There’s nothing

quite like asking them as it happens,” Brandeisky said.

The lesson here is that while quantitative data is a valuable

tool, it is still diffi cult to predict shopper behavior.

“Consumers don’t behave rationally in any type of

retail setting. They are irrational by defi nition,” said Robert

Mariano, ’87 (XP-56), chairman and CEO of Roundy’s, Inc.,

the Milwaukee-based parent company of the Roundy’s and

Mariano’s grocery chains.

“In the old days, when I was a storekeeper, I knew every one of

my customers,” Mariano continued. “Today, on a relative basis,

we know very little. That’s why we use quantitative information—

to build a relationship so that we can be relevant.”

L. Dick Buell, ’78, former chairman and CEO of Catalina

Marketing, Inc., based in St. Petersburg, Florida, said that

research conducted by his fi rm on consumer loyalty uncovered

a troubling fact: less than half of consumers who are considered

to be highly loyal to a particular brand maintain that loyalty

a year later.

“Loyalty is a defection dilemma. Loyalty sounds like

the glass is half full. In truth, it’s a glass half empty,” Buell

said. “Loyalty is something you think you can build and

accumulate, but it can be fl eeting.”

The key to knowing the customer, according to the

panelists, is gathering both quantitative and qualitative

data, and then fi nding bright minds to draw the correct

interpretation based on both sets of information.

“The challenge is to turn all that data into insights and

action,” Brandeisky said. “The data is almost a commodity

there’s so much of it. The real value-add is turning that into

something insightful, something useable.”

Hurst concluded that the information was valuable for both

the professionals and the academics in the audience. “I think

the panelists really provided a lot of insights into how data

is accumulated and used to understand the way consumers

act,” he said. “I think this is the direction we want to move

as a school going forward, where we take this very detailed

quantitative analysis and use it for a variety of academic

pursuits.”—John Slania

UNDERSTANDING HOW SHOPPERS BEHAVEData doesn’t explain what drives purchasing decisions, panelists say


SAVETHEDATE

Alumni CelebrationOctober 5Millennium Park

Reconnect with fellow

graduates and honor

this year’s Distinguished

Alumni Award winners.

Get ready for an

unforgettable night at

Alumni Celebration on

October 5.

Visit ChicagoBooth.edu/ac12

for more information.


as a 3D animation firm and a farm management company,

both based in Uruguay.

One of the club’s most active and successful programs

is the Booth Entrepreneurs Advisory Group, which, for 10

years, has invited local area start-up founders and angel

investors to speak to Booth alumni involved in entrepre-

neurial ventures. They discuss business problems and receive

valuable advice that they otherwise would obtain only for a

hefty consulting fee, Stopak said.

In addition to clubs that are geographically based, there also

are special interest groups such as the Chicago Booth Black

Alumni Association (CBAA), the Real Estate Alumni Group

(REAG), and the Chicago Women in Business Alumnae

Network (CWIBAN) that are broadening Booth’s influence.

CWIBAN supports admission of women

to Booth and connects women gradu-

ates around to booth the world, said Zina

Markevicius, ’02, a founder of CWIBAN

who runs her family’s real estate business

in Los Angeles. Women represent more

than 20 percent of Booth alumni, a net-

work that is expected to expand as their numbers grow in

MBA classes. The group hosts discussions with successful

women professionals on career and life strategies, facilitates

job referrals, and assists alumnae moving to a new city.

CWIBAN’s capstone event is Women’s Week, which

includes events for prospective and admitted students held

in 30 cities during the first week in May. These range from

intimate to large events, and they can have a big payoff. “We

want to bring the best students in the world to Chicago,”

Markevicius said. “I feel the value of my degree, and I want

to give back.”—Judith Crown

For more information about Chicago Booth clubs,

contact [email protected]

When Erik Wallsten, ’04, returned to his native Mexico after

earning his MBA, five or six students a year from Mexico

were attending Booth. Now, eight years after Wallsten first

became active in the Alumni Club of Mexico and expanded

its programs, three times as many students a year are head-

ing to the school.

One of the club’s missions is to get the Booth name out to

top prospects who might not be familiar with its celebrated

faculty and global business connections. Consequently, the club

sponsors events ranging from a private tour of the Mexican

president’s residence to conventional cocktail parties. “We

publicize headline events so as to promote the Booth brand

name and attract more applicants,” said Wallsten, the outgoing

president who manages a private equity firm that invests in

socially beneficial projects.

The events impress prospective students who “see the

strength of the local network as compared to other schools

whose alumni get together only sporadically,” Wallsten

said. He has coffee with about 15 prospective students each

year; he and other alumni also contact admitted students.

Recruiting is important because, “I am convinced that Booth

has the top MBA program of any school worldwide and that

the best way of attracting top students is by interacting with

them directly,” he said.

The Alumni Club of Mexico is among 70 alumni clubs

worldwide that keep the Booth name front and center in

US cities and around the world. “A number of these clubs

are doing excellent community building and opening strong

networking opportunities,” said Rachel Nash, senior associ-

ate director, Alumni Affairs and Development. The clubs are

headed by professionals who juggle jobs and families but

find it rewarding to stay engaged with Booth.

In North American cities with large con-

centrations of Booth alumni, the clubs

have the opportunity to bring Booth’s

intellectual capital to alumni with particu-

lar interests and expertise. For example,

the Alumni Club of Washington DC

sponsors a group for alumni interested

in China, and another for those involved in energy issues

as part of the Booth Energy Network, noted Aaron Stopak,

’03 (AXP-2), the president of the club who is an advisor to

a hedge fund that invests in Asian equity markets, as well

Alumni News

Alumni Organizations Extend Booth’s Reach

Cou

rtes

y of

Zin

a M

arke

vici

us

Zina Markevicius

Cou

rtes

y of

Aar

on S

topa

k

Aaron Stopak


Alumni News

Changes inClub LeadershipRussia

President

Evgeny Tonkacheev, ’05 (EXP-10)

Outgoing president

Alina Gutkina, ’98 (EXP-3)

San Francisco

President

Patrick Zanoni, ’00

Outgoing president

Sandeep Ganesh, ’07

Spain

President

Brenda McCabe, ’02 (EXP-7)

Outgoing president

Francisco Trullenque, ’02 (EXP-7)

United Arab Emirates

President

Mark Corusy, ’94

Outgoing president

Fakhr-Eddine (Faysal) Mokadem, ’05

United Kingdom

President

Eric Martin-Vallas, ’08 (EXP-13)

Outgoing president

Kaustubh Wagle, ’10

Class Gift Campaign Achieves 100 Percent Participation

Alumni Angels Recognized

For the second year in a row, students from Booth’s Executive MBA Program united

to achieve 100 percent participation in the annual Class Gift campaign. Student

donations across the Chicago, London, and Singapore campuses totaled nearly

$130,000—about $32,000 more than the previous year—in an impressive display of

support for the student-led initiative.

Alumni and friends contributed an additional $55,000 to the campaign, and

the school offered matching incentives that brought the combined total to nearly

$310,000. The Class Gift will support two funds: the newly created Executive MBA

Program Office Fund, which will sponsor programs and initiatives that directly

benefit Executive MBA Program students, and the Global Visibility Fund, which

promotes Chicago Booth’s international presence.

“Our class was so intense, so adamant about maximizing its participation in

everything the Booth community had to offer. Our achievement with the Class Gift

was in part a recognition of how rich that community is,” said Leo Alves, ’12 (XP-81).

“We wanted to make a statement. To send a message about what we could accomplish

as a class, about what we mean to each other and what this institution means to us.”

—Chelsea Vail

The fifth annual Alumni Angel Awards (A3) honored four Chicago Booth alumni for

their exceptional engagement with students. Class Agents announced the winners dur-

ing Worldwide Booth Night on April 12. The event, which was hosted in 90 cities this

year, is an opportunity for alumni, as well as current and recently admitted students, to

meet in cities around the world and celebrate their connection to Booth.

This year, students honored Hoke Horne, ’97, vice president of pricing at Juniper

Networks in Sunnyvale, California; Roberto Ippolito, ’03, head of corporate finance

at General Electric Capital Italy; Kenneth Kelly, ’98, vice president of sales and mar-

keting at DaVita, a provider of kidney care based in Denver; and Karl Muth, ’10, a

consulting economist.

Students from all four MBA programs submitted nominations, sending stories

about contributions alumni made to their professional and personal development. A

list of finalists was selected and presented to the entire student body for a .

Horne was honored for his commitment to recruiting and mentoring Booth stu-

dents at Juniper Networks, and Ippolito was recognized for his enthusiasm in devel-

oping the Italian community at Booth. Kelly was honored for helping the student-run

Operations Strategy Group expand and find sponsorship, and Muth was recognized

for providing guidance to students interested in emerging markets.—Chelsea Vail

—Chelsea Vail


Chris Turillo, ’10, already had a plan when he entered Booth. He knew he wanted

to work in India to help increase education and employment opportunities in the

rapidly growing nation.

Earning his MBA, as well as a master’s

degree from the Johns Hopkins School

of Advanced International Studies, gave

Turillo the skills he needed to launch

the nonprofit he hopes will help address

India’s systemic unemployment. In 2011,

he and a partner opened Medha, which

aims to improve employment prospects for

students from low-income families, often

from rural communities, who lack the

resources to obtain and succeed in a job.

The nonprofit provides college and high school students with training, leadership

development, and career services in the northern Indian city of Lucknow.

“Booth was a big part of building the capabilities and the confidence required to

actually take the first steps to start Medha,” Turillo said.

He also said that Booth methodology influenced the structure of the program.

“We are focused on ensuring our program is taught in an experiential way,

creating real-life and simulation activities as a way of learning instead of the

traditional rote-based methodologies.”

For example, to learn basic supply and demand, students track the prices of

vegetables at a market, enter the data into an Excel spreadsheet, and present their

findings and conclusions. This simple exercise enables students to learn economic

principles, MS Office, the English language, and presentation skills.

A native of Boston, Turillo spent time studying abroad in India as an undergraduate

student at the University of Puget Sound. After graduation, Turillo spent several years

researching ways to return to the country. Finally, he landed a 10-month fellowship at

an Indian microfinance organization, which kept him on for another year as codirec-

tor of business development with now-partner at Medha, Byomkesh Mishra.

When he and his partner began researching unemployment and job-training in

India, they uncovered a formidable problem. “Fifty-nine percent of youth in the

labor market suffer some degree of unemployability, while 52 percent of employed

youth lack skills,” he said. “These low skill levels result in higher unemployment and

underemployment, and increased inequality.”

Luis Miranda, ’89, CEO of a Mumbai private equity firm who sits on Medha’s

board and is a member of Booth’s Global Advisory Board, agreed. “When Chris told

me about his plans to set up Medha, I immediately offered to be an advisor since the

need for skills training is so great in India and he is so passionate about it.”

Medha aims to improve employability levels for more than 20,000 college and high

school students across four Indian states by 2017.

“I am motivated by the opportunity to have a positive influence on young people’s

lives,” Turillo said.—Kate Ancell

Alumni News

Young Alumnus Launches Skills Training Initiative in India

Global Advisory Board Welcomes New MembersThe Global Advisory Board, comprised

of more than 85 business leaders and

entrepreneurs, including Booth alumni

and friends, advises the dean on strategic

choices and works to enhance the school’s

reputation. New members for the 2012

fi scal year are:

Americas Cabinet

Pedro Faria, ’02

Managing Partner, Tarpon Investments

Jorge Saieh, AM ’97, MBA ’98

Chairman, CorpBanca

Manuel Sanchez, AM ’83, PhD ’85

Deputy Governor, Bank of Mexico

Asia Cabinet

Thomas Chan, ’92

Managing Director, Golden Summit Capital

Clifford Chiu, ’82

Partner, KKR Asia Limited

James Quella, ’81

Senior Operating Partner, Private Equity,

The Blackstone Group

Steve Sun, ’97

Co-chairman,

Concord Medical Services Holdings

Dennis Zhu, ’93

Former Managing Director,

Oaktree Capital

Europe, Middle East, and Africa

(EMEA) Cabinet

Alexey Ananiev, ’05 (EXP-10)

Co-owner, Chairman, and

Managing Director, Technoserv A/S

Rolf Friedli, ’96 (EXP-1)

Partner and Chairman,

CapVis Equity Partners Ltd.

Richard Seewald, ’05 (EXP-10)

Partner, ALPHA Associates

Based in Lucknow, Medha's job training program

focuses on experiential learning.

Cou

rtes

y of

med

ha.o

rg


Share it with us.Help the Booth community and increase your company’s talent at the same time. By accessing

the most gifted business people around, you’ll do more than strengthen your network, you’ll

actually strengthen business itself. Together, we can make a difference.


Go to TheBoothEffect.com today.

Talk to Us:Connect to Booth and help

strengthen the school’s

relationship with your company.

Share a Lead:Have a job or know of a job

that Chicago Booth talent

could fill?

Access Resumes:Find students and alumni to fill

current opportunities.


Career News

Graduates Branch Out in Career Selections Booth graduates continue to diversify their career choices,

branching out into marketing, e-commerce, entrepreneurship,

and general management.

While the school remains a top destination for recruiters

from fields such as consulting and financial services, students

are weighing more options as they consider a job market

marked by Wall Street consolidation and growth in technol-

ogy and the internet.

“There is a growing interest among our students to

pursue new opportunities in the tech, e-commerce, and

internet industries, both at large companies and within

start-ups, said Nima Merchant, associate director, employer

relations for Career Services. “With the diversity of jobs

available, there really is something for everyone—and we’re

seeing a stronger, more vocal presence from alumni who

are successful in these fields.”

For example, more than 4 percent of the class of 2011

accepted jobs in the e-commerce and internet industries.

While that may seem like a small percentage, those fields

tapped a negligible number of recruits 10 years ago and only

accounted for eight hires as recently as 2007.

Marketing has risen from the sixth to third-most popular

function for graduating Booth students from 2001 to 2011.

General management went from ninth highest to fourth in

2011. The number of students joining start-ups or launching

their own firms has more than tripled over the past decade,

although that growth started off a small base.

Financial services and consulting contin-

ue to be top destinations, attracting more

than two-thirds of Full-Time graduates.

“Even during the recession, ‘bulge-bracket’

firms showed a real, demonstrated inter-

est in our students,” said Melanie Scarlata,

assistant director, employer relations for

Career Services.

But the explosion in technology and other fields are

presenting students with more options. Scarlata says Career

Services has been proactive in scoping out new markets and

opportunities, working in concert with Alumni Affairs and

Development and student groups, as well as the Kilts and

Polsky centers.

“Booth graduates are able to go into careers they feel pas-

sionately about,” Scarlata added. “The opportunities are very

real for them.”—Kate Ancell

For more employment information, go to ChicagoBooth.edu/employment

Melanie Scarlata

Fields of Their DreamsWhere Full-Time MBA Program graduates have headed over the past 10 years

76.8%75.2%

68.9%

2001 2007 2011

2.8%

5.4%

8.2%

2001 2007 2011

7.2%7.5%

10.8%

2001 2007 2011

4.2%

1.6%

0.6%

2001 2007 2011

3.2%

1.4%

0.7%

2001 2007 2011

Financial servicesand consulting Entrepreneurship

GeneralmanagementMarketing

E-commerceand internet

Not to scale

www.chicagobooth.edu/employment


Career News

Booth Hosts First Start-Up Networking Night

H E A R D AT C H I C A G O B O O T H

You need to exist long enough for lightning to strike.Phil Nevels, ’10, advised students

on the early stages of business

development based on his experi-

ence launching Power2Switch,

an alternative energy provider that

started gaining traction as media

attention drove potential customers

to the company website. Nevels is

chief operating offi cer of the

Chicago-based start-up and was

among the entrepreneurs who

attended Booth’s fi rst Start-Up

Networking Night, a recruiting event

geared toward opportunities in

Chicago’s entrepreneurship scene.

A recruiter from tea shop operator Argo

Tea was on campus in April to meet

students, discuss its business model,

and recruit for a marketing internship.

The young Chicago-based company

was among more than 20 who attended

Start-Up Networking Night (SNN).

The recruiting event is part of Booth’s

effort to build relationships with young

companies and support the increasing

number of students pursuing entrepre-

neurship as a career. The joint effort of

Career Services and the Polsky Center

for Entrepreneurship drew 120 first-

and second-year students.

“We stress to stu-

dents that they have

to network to get

anywhere in the start-

up world,” said Nima

Merchant, associate

director, employer

relations for Career Services, and one of

the organizers.

The SNN followed the format of

Career Services’ Corporate Networking

Nights, industry- and function-specific

recruiting events that provide companies

an opportunity to connect with students

interested in particular fields.

“As an MBA student interested in

entrepreneurship, you don’t have the

traditional structure of recruiting,” said

second-year Full-Time MBA student

Kasra Moshkani, who works for his own

start-up, HireBrite, which helps entre-

preneurs to hire young business and

technical talent.

“The thing I was most excited about

tonight was the variety of companies

we’ve seen,” he added, noting the range

from established VC firms to companies

in their first few months of business.

Companies that attended included

winners and finalists from Booth’s New

Venture Challenge competition such

as Chicago-based firms BenchPrep, a

test-prep developer for mobile devices,

InContext Solutions, a market research

firm that specializes in 3D simula-

tions, and Power2Switch, an alternative

energy provider. Some, like Argo, which

operates cafés in Chicago, New York,

St. Louis, and Boston, were established

ventures looking to fill specific roles

based on company needs. Others, such

as KLUTCHclub, which delivers health

and wellness products to subscribers

monthly, were there to recruit more

broadly and raise awareness.

“I think events like this go a long way

in proving that Booth is investing in the

entrepreneurialism that’s going on,” said

Grant Zallis, vice president and head

of human resources and recruiting at

InContext Solutions.

Career Services would like to host

more networking functions for entre-

preneurship, Merchant said. She expects

many of the start-ups to return, espe-

cially as the number of events grows with

the school’s entrepreneurship program-

ming. And she hopes to attract more

start-ups from outside the Midwest.

“What could be better than the SNN to

connect students to start-ups interested

in Booth talent?” Merchant said.—Kate Fratar

Nima Merchant


To ensure that Booth stays top of mind for Asia companies

scouring the globe for premier talent, Career Services hosted

its first interactive workshop tailored specifically for Asia-

based recruiters.

The half-day Asia Recruiters Workshop in April attracted

several dozen multinationals and Asia-based companies. Career

Services staff provided an overview of the rigorous program

that sets Booth graduates apart and highlighted data on recent

student job offers and acceptances. They also demonstrated

how to use the school’s recruiting tools such as the Global

Talent Solutions (GTS) database and the online resume data-

base. The workshop was geared exclusively to employers.

“The firms I work with often seek general managers to

get new businesses up and running,” said Leslie Taylor, ’02,

associate director, employer relations, based in Hong Kong.

Students and alumni are increasingly interested in new

opportunities, including opening new geographic markets for

multinationals, she noted. “There seems to be an appetite to

seize these career opportunities.”

The event attracted a blue-chip roster of companies. Some,

such as General Electric Co., Goldman Sachs Group, Inc.,

Google, Inc., Microsoft Corp., Credit Suisse Group, and

McKinsey & Co., have established recruiting relationships with

Booth, mostly through their US headquarters. Others, such as

the World Bank, Intercontinental Hotels Group, Jones Lang

LaSalle, Inc., and software giant SAP AG, are building relation-

ships with the school.

“We foresee that Booth will be a good partner for us to

recruit for certain corporate positions and perhaps some senior

hotel operations positions,” said attendee Michael Blanding,

manager of school relations for InterContinental Hotels Group,

who recruits for Asian, Middle East, and African hotels from

Career News

Raising Visibility with Asia-Based Recruiters

Singapore. “We’re opening a new hotel every week across the

globe and need top talent to lead the business.”

Although some Asia-based recruiters may believe that

it is difficult to recruit from afar, several tools provided by

Booth make it easy. For example, employers can post jobs

online through the GTS database. The postings are free and

the best first step for connecting with Booth talent, Taylor

said. The resume database enables recruiters to search dif-

ferent pools of talent, such as alumni or students in the

full-time or part-time programs. Recruiters can search can-

didates using such criteria as language, years of experience,

and geographic preference.

Outside of traditional recruiting methods, companies use

video conferencing and Skype to present information sessions

or interview candidates. As another way to connect, some

Asian companies host events for Booth students who organize

visits to the region.

“It was extremely useful for the recruiters from our busi-

ness to understand how to search Booth’s databases and post

positions to give them access to talent pools,” said Kim Purnell,

SAP’s executive recruiting director for Asia Pacific and Japan.

Concluded Taylor, “One of my goals is to ensure we don’t

leave any stones unturned, that we don’t leave job opportuni-

ties on the table, whether entry-level for recent grads or senior-

level for our executive students and alumni.”—Judith Crown

Pau

l A

udia

Held at Booth’s Singapore campus, the half-day workshop introduced employers to

tools for recruiting Chicago graduates.

“It was extremely useful for the recruiters from

our business to understand how to search

Booth’s database and post positions to give

them access to talent pools.”

—Kim Purnell, SAPs executive recruiting director

for Asia Pacifi c and Japan

42 Chicago Booth Magazine Summer 2012

Alumni News

Reconnect with your class and relive your favorite MBA

memories at special reunion events on October 4–6.

YOU HAVE TO BE THERE.

2011, 2007, 2002, 1997, and 1992

2012

Visit ChicagoBooth.edu/reunion2012 for more information.

www.chicagobooth.edu/reunion2012


Back Story

“ We get analytical about what goes on when we play a round of golf. It’s all about probability and statistical distributions.”

Chad Syverson, professor of economics, is a frequent golfer and often plays with

University of Chicago economists Steven Levitt, John List, and Derek Neal. The team

usually plays in scramble tournaments, in which the best shot among the four

determines the starting point for each subsequent shot. Inconsistency becomes an

advantage as the golfers pick the best and discard the worst. “In a scramble, we don’t

need everyone to do something good, we just don’t want the same bad shot,” said

Syverson, who was photographed by Chris Strong at the Jackson Park Golf Course on

Chicago’s South Side. “It’s a portfolio problem.”—Judith Crown

Accessorize with Booth: It all started when David Booth, ’71, suggested that the school

should have a signature tie. The student-led Dean’s Marketing Advisory Committee

offered to help run a design contest, which concluded in May, with a $300 check and

bragging rights for the best overall design going to fi rst-year Full-Time student Joseph Ryu.

Meenakshi Dash, ’08, won $100 for the most original design and Mark Zmijewski,

Leon Carroll Marshall Professor of Accounting, won $100 for scoring the most “likes”

on Facebook. The fi ve-judge panel evaluated the designs for originality, suitability for a

business setting, and ease of manufacturing. To view all 60 design submissions, visit the

Booth Community Facebook page at Facebook.com/ChicagoBoothBusiness.

From left to right: David Booth, Meenakshi

Dash, Joseph Ryu, and dean Sunil Kumar.

Not pictured: Mark Zmijewski.

Chicago Booth Magazine…

Get it now Download the new Chicago Booth app at ChicagoBooth.edu/Boothapp.

to Go!Stay connected to alumni

stories, faculty news, and more—

wherever you are.

Get Chicago Booth Magazine on

your iPad or iPhone by downloading

the new complimentary Booth app.

www.chicagobooth.edu/Boothapp

The University of ChicagoBooth School of Business

5807 South Woodlawn Avenue

Chicago, Illinois 60637

Change Service Requested

Nonprofi t Organization

US Postage

P A I DPermit No. 4444

Twin Cities, MN

How Scott Griffith, ’90, CEO of Zipcar, drove car sharing to the mainstream

Opening New Routes

CH

ICA

GO

BO

OT

H M

AG

AZ

INE

VO

L. 3

4, N

O. 2

, SU

MM

ER

20

12

The University of Chicago Booth School of Business Summer 2012

Critical DialoguesDean Sunil Kumar gets the inside track on Zipcar from CEO Scott Griffith, ’90 20

Temptation’s Siren SongResearch by Wilhelm Hofmann investigates desire, willpower, and self-control 10

Good Energy Experts discuss fueling the future at the 60th Annual Management Conference 26

Documents

Chicago Booth Magazine Summer 2012