UChicago News

Mary Lou Gorno appointed chair of Smart Museum Board

Tue, 05 Jun 2018 16:15 -0500

Mary Lou Gorno, a business executive and alumna of Chicago Booth who serves as vice chair of the University of Chicago’s Board of Trustees, has been appointed chair of the Smart Museum of Art’s Board of Governors.

Gorno, managing director of the executive search firm Ingenuity International, serves the University in a variety of capacities, including chair of the University of Chicago Phoenix Society, a trustee of Court Theatre and a director at NORC. She has been a member of UChicago’s Board of Trustees since 2004.

“Mary Lou Gorno brings to the Smart Museum Board of Governors a deep knowledge of the University of Chicago and extensive experience in leading organizations. I look forward to seeing momentum as the Smart Museum continues to grow with her board leadership, supporting the expanding role of the arts at the University,” President Robert J. Zimmer said.

Gorno’s two-year appointment as board chair is effective Sept. 1. The Smart Museum of Art is UChicago’s fine arts museum, home to thought-provoking exhibitions, a wide-ranging collection, and public programs that encourage the examination of complex issues through the lens of art objects and artistic practice, both contemporaneously and across history.

"The arts have an important and growing role at the University of Chicago. I look forward to working with my fellow board members in support of Alison Gass and her dynamic team as the Smart Museum writes the future of university art museums," Gorno said.

Gorno succeeds Pamela Hoehn-Saric, MAT’81, who has served as chair of the Smart Museum Board since 2012. During that period, the Smart Museum celebrated its 40th anniversary, appointed Alison Gass as the Dana Feitler Director and launched the Feitler Center of Academic Inquiry. Hoehn-Saric will continue to serve as a member of the Smart Museum Board.

“I am thrilled to welcome Mary Lou to the board as chair-elect,” said Hoehn-Saric. “The Smart is on an exciting trajectory, and Mary Lou brings extensive experience and talent in board development and strategy, which will help Ali, the board and the staff realize Ali’s exciting vision for the museum.”

Gorno earned a bachelor’s degree in business and economics from Saint Mary’s College, a master’s degree in journalism from Northwestern University, and master’s degree in finance and accounting from UChicago’s Booth School of Business.

Gorno began her career in advertising, becoming a senior executive at the Leo Burnett Company where she worked with Walt Disney, Reebok and Procter & Gamble. She later moved to the executive search profession and currently leads the CEO and Board practice for Fortune 500, mid-cap and privately owned companies. As a board and CEO adviser, she specializes in organizational governance, succession planning and leadership issues.

In addition to her extensive involvement at the University, Gorno serves as vice chair of the Board of Trustees of the Chicago Symphony Orchestra, vice chair of the Archdiocese of Chicago Catholic School Board and director of the Chicago Humanities Festival.

Chicago Booth entrepreneurs tap medicine, law, engineering for startup success

Mon, 04 Jun 2018 15:06 -0500

When it comes to startups, having the resources of a major university at your disposal can make a big difference.

Entrepreneurs who recently graduated from the University of Chicago Booth School of Business shared their experiences during a May 17 lunchtime panel discussion at the Harper Center in Hyde Park as part of the Polsky Center for Entrepreneurship and Innovation’s month-long UChicago Innovation Fest. The wide-ranging discussion was moderated by Mark Wilson, a senior writer for Fast Company.

“There were so many cross-disciplinary programs our company took advantage of while we were in school,” said Jennifer Fried, MBA’15, and co-founder and CEO of ExplORer Surgical, a digital playbook for operating room personnel. “I think that is very unique to the University of Chicago.”

Fried’s co-founder was a surgeon at the University of Chicago Medicine, and he also led a research laboratory within the Department of Surgery. Her startup team worked with the Polsky Center and the UChicago Startup Investment Program, an initiative in which the university invests alongside established venture funds in startups led by UChicago faculty, students, staff and alumni.

Brian Clark, MBA’17, co-founder of Ascent Technologies, a technology firm that helps companies build and manage regulation compliance programs, agreed. The opportunity to access programs and faculty from different disciplines “creates a sense of collectivism and community,” he said, that allows new ventures “not only to start, but to thrive and grow.”

For his part, David Rabie, MBA’15, co-founder of Tovala, a food technology company that pairs a steam-based oven with a meal-kit subscription service, hired his first product engineer thanks to a collaboration between UChicago and the University of Illinois at Urbana-Champaign’s College of Engineering. The partnership unites Chicago Booth students and entrepreneurs with top-tier engineering talent.

“Investors look to check certain boxes,” said Rabie. “Being able to say that one of our founders had experience building products from an R&D level to large scale production was really important.”

All three companies—Tovala, Ascent Technologies and ExplORer Surgical—competed in the Edward L. Kaplan, '71, New Venture Challenge, culminating in a daylong event where students present their ideas for new companies to a panel of investors and entrepreneurs and compete for over $1 million in cash prizes and in-kind services, in 2015 when their founders were Booth students. Tovala won first prize, ExplORer Surgical placed second and Ascent Technologies was a finalist. They were also among the first companies to receive funding from the UChicago Startup Investment Program, a $25 million investment fund created by the University in 2016 to invest in startups in the early round of fundraising, known as a Series A.

All three panelists said that they believe the NVC competition was integral to their later success in securing financing.

“The NVC conferred legitimacy and gave us commercial and personal credibility,” said Clark. “The NVC and Chicago Booth were big reasons why individuals felt comfortable investing in us.”

Rabie added, “As part of the NVC, you’re constantly being put on the hot seat in front of potential investors and forced to answer a wide range of questions about your business. A lot of fundraising comes down to your ability to do this well, and I feel like the training I received from the NVC gave me a strong advantage.”

The panel discussion touched on a number of issues common to startups, most notably financing as well as product development, marketing and personal growth.

On getting an investor to write that first check:

All three entrepreneurs agreed that getting the first check is the hardest. “Once the first domino falls, it gets a lot easier,” said Rabie. “Money follows money,” said Clark. “It’s the nature of the game.”

On the challenges of bringing a new product to market:

“We’re trying to fundamentally change the way people think about eating at home,” Rabie said. “We have customers as young as 20 and as old as 85, but our real target is young families. It’s a massive market and we’re still trying to figure out the best way to reach these customers. We haven’t cracked that nut yet.”

On the importance of knowing your limitations and empowering employees:

“You can’t really develop and empower other people if you don’t know what your own strengths and weaknesses are,” Clark said. “You have to be honest about that. And you also have to have to be supportive of your people. It’s about listening and trusting the process and ultimately creating a culture that allows people to succeed.”

On what advice you would give your younger self about surviving as a startup:

“I would tell myself, ‘Hey, this is going to be a crazy ride so just try and take it one day at a time,’” Fried said. “Because every day is a fire drill, every day there’s a crisis of some kind. You have to be able to prioritize what needs to be done right away, get it done and then move on. Knowing that would have saved me a lot of sleepless nights.”

Big Brains podcast welcomes Nobel-winning economist Richard Thaler

Mon, 04 Jun 2018 10:00 -0500

Editor’s note: This is the final episode of Big Brains, but stay tuned for several bonus episodes this summer, and a new season come fall with some of the pioneering minds at the University of Chicago.

It has been a long journey for economist Richard Thaler, from early days struggling to get his research published to being honored with the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel in October.

Often dubbed as “one of the founding fathers of behavioral economics,” Thaler has worked to bridge the gap between psychology and economic theory to explain people’s often irrational economic decisions.

“Economics kind of, by design, leaves out the behavior,” Thaler said.

Thaler, the Charles R. Walgreen Distinguished Service Professor of Behavioral Science and Economics, came to the University of Chicago Booth School of Business in 1995, but when he arrived, it was in many ways like entering the lion’s den.

“The University of Chicago was not a hotbed of behavioral economics, in fact, pretty much the opposite,” Thaler said. “But I thought this was a way to sharpen my tools—arguing with [UChicago professor and Nobel laureate] Gene Fama is a good way of improving your financial economics.”

Thaler made a career out of disrupting assumptions with his unusual approach to his research, which eventually went mainstream. In 2008, he published the best-selling book Nudge with colleague Cass Sunstein; and in 2015 published Misbehaving: The Making of Behavioral Economics. He also appeared in the 2015 Oscar-nominated film The Big Short, explaining economics alongside actress Selena Gomez.

Despite his success, there are still many who question the science of behavioral economics. But Thaler says he has two things to which he attributes his perseverance.

“I’m stubborn, and I don’t mind a fight,” Thaler said.

On this episode of Big Brains, Thaler discusses how a bowl of cashews inspired his early research, how psychologists Daniel Kahneman and Amos Tversky influenced his career, and what it’s like to get (and miss) a 4 a.m. Nobel wakeup call from Sweden.

Subscribe to Big Brains on Apple Podcasts, Stitcher and Google Play. New episodes will be available Monday mornings through the Spring Quarter.

Manifest wins first place in Edward L. Kaplan, ’71, New Venture Challenge

Thu, 31 May 2018 11:16 -0500

The Polsky Center for Entrepreneurship and Innovation at the University of Chicago on May 30 announced the winners of the 22nd annual Edward L. Kaplan, '71, New Venture Challenge, a top-ranked accelerator program in the nation.

Eleven finalists shared in a $700,000 cash prize pool—the highest ever given at the New Venture Challenge, greatly surpassing last year’s prize pool of $400,000. Thanks to a recent gift from Chicago Booth alum Rattan L. Khosa, an additional $150,000 for the new Rattan L. Khosa First-Place Prize was included, as well as $240,000 that was added from various prize sponsors and distinguished judges during today’s deliberations.

“Every team that presented in today’s finals is a real and operational company that can grow beyond this program,” said Starr Marcello, executive director of the Polsky Center and adjunct professor. “We are proud of all the teams that presented to our investors today, and those that took part in the 22nd year of the NVC. We are excited to see them grow.”

Finalists presented to 27 distinguished judges—including Dan Caruso, MBA’90, founder and CEO of Zayo Group; Immanuel Thangaraj, MBA’93, managing director of Essex Woodlands Health Ventures; and Penny Pritzker, founder and chairman of PSP Capital and U.S. Secretary of Commerce under President Barack Obama, among others.

Winners of the 2018 NVC include:

Manifest, a distributed ledger solution that will standardize 401(k) transfers, won first place and $315,000, including $150,000 from the Rattan L. Khosa First-Place Prize, $120,000 from individual distinguished judges, $25,000 from The Caruso Foundation and $20,000 for their acceptance into the Pritzker Group Venture Fellows Program this summer. Manifest, which is a member of the Polsky Incubator, is creating a network between 401(k) providers and streamlining the process to help eliminate the estimated $2.5B that providers lose each year due to these inefficiencies.

Mindful Urgent Care, a company offering same-day, non-emergent mental health and substance abuse psychiatric services to insured and cash-paying clients, took home second place and $125,000, including $75,000 from individual distinguished judges, $25,000 from The Caruso Foundation, $12,500 from the Polsky Center and $12,500 from the UChicago Innovation Fund. Mindful Urgent Care was the winner of the 2018 Global New Venture Challenge and will be opening its first location in New York in the next month.

Coeus.ai, a company that empowers video game streamers and gamers by utilizing proprietary machine-learning algorithms to automatically create hundreds of highlights out of any video game stream and gameplay, won third place and $90,000, which includes $40,000 from OCA Ventures, $25,000 from The Caruso Foundation, $12,500 from the Polsky Center and $12,500 from the UChicago Innovation Fund.

There was a tie between MUU and BrewBike, each taking home $45,000. Muu, a Brazilian ice cream that has less calories, more protein and less fat than traditional brands, took home $22,500 from the Polsky Center and $22,500 from the UChicago Innovation Fund. BrewBike, a company that provides coffee to college communities, took home $20,000 for their acceptance into the Pritzker Group Venture Fellows Program this summer, $12,500 from the Polsky Center and $12,500 from the UChicago Innovation Fund.

Oxalo Therapeutics, a biopharmaceutical company based on University of Chicago research and committed to ending the epidemic of kidney stones, took home $25,000, including $12,500 from the Polsky Center and $12,500 from the UChicago Innovation Fund.

nuBorn Medical, a company creating a smart baby bottle system to diagnose and treat feeding problems in preterm infants, took home $15,000 including $7,500 from the Polsky Center and $7,500 from the UChicago Innovation Fund.

Four finalists: Seurat Therapeutics, FORESEEaBill, Sweet Karma and Haystack ABI each took home $10,000, including $5,000 from the Polsky Center and $5,000 from the UChicago Innovation Fund. Seurat Therapeutics is a biotech startup developing a new medication that can stop migraines before they start. FORSEEaBill is an innovative platform technology that provides life sciences organizations with decision support in identifying the appropriate payer for every test, procedure and service performed during a clinical trial. Sweet Karma is a dessert company focusing on innovative dessert for health and fitness conscious people. Haystack ABI is a data-driven management platform for restaurants.

The New Venture Challenge finals is one of the marquee events of UChicago Innovation Fest. Now in its third year, UChicago Innovation Fest celebrates pioneering discovery and entrepreneurial endeavors at the University of Chicago. Led by the Polsky Center for Entrepreneurship and Innovation, the month of events, workshops and accelerator programs highlights the breadth and impact of innovation at UChicago in the areas of entrepreneurship and research commercialization, scientific advancements and social impact.

Startups with societal impact compete in Social New Venture Challenge finals

Tue, 22 May 2018 10:40 -0500

Seven teams have been selected to pitch their social impact startups during the finals of the John Edwardson, ’72, Social New Venture Challenge on May 22.

The SNVC, a track of the Polsky Center for Entrepreneurship and Innovation’s nationally ranked Edward L. Kaplan, ’71 New Venture Challenge, is one of the nation’s first social venture competitions and has helped more than 90 companies and nonprofits since it began in 2011.

“Every year, we’re impressed by the creativity of our teams in addressing their stated challenges,” said Robert H. Gertner, the Joel F. Gemunder Professor of Strategy and Finance at Chicago Booth and the John Edwardson Faculty Director of the Rustandy Center. “But this year they’ve pleased us with the degree to which they’ve proven their viability in the market.”

Past winners of the Social New Venture Challenge, which is run in collaboration with Chicago Booth’s Rustandy Center for Social Sector Innovation, include BallotReady, the online voter guide founded by Alex Niemczewski, AB’09, and Aviva Rosman, MPP’16; and LuminAID, the solar-powered lamp for disaster relief founded by Andrea Sreshta, MBA’16.

SNVC finalists will present to a panel of distinguished judges and compete for $75,000 in startup capital and $40,000 in additional specialized awards during the eighth annual competition. Doors open for SNVC finals at 9:15 a.m. in Harper Center, C-25, and remarks will start at 10 a.m.

Winners will be announced at the Taste the Impact Reception in Harper Center, Room 104. The SNVC Finals also will be streamed live. Register to attend or livestream the 2018 SNVC Finals and the Taste the Impact Reception here.

The finalist teams that will be presenting include:

Unbreakable, a 10-week, anti-bullying online video program that focuses on empowering youth by improving their self-confidence and coping skills using scientifically proven psychological techniques.
VouchCircle, a professional networking platform for underserved communities.
Shakti, which empowers functionally illiterate women in India to enforce their rights and access legal and public health resources.
Insights for Impact, a for-profit social enterprise that helps small to medium nonprofit organizations realize the use of data within their organizations.
Gather Activism, a digital platform for political activism.
Mighty, a free online and mobile marketplace for the public to deposit money in secure, community-investing banks.
AIM Clinics, which provides the gold standard autism therapy to children in rural U.S. communities.

Behavioral economist Sendhil Mullainathan to join Booth faculty as University Professor

Mon, 21 May 2018 12:10 -0500

Influential economics scholar Sendhil Mullainathan will join the University of Chicago Booth School of Business faculty on July 1, 2018, where he has been appointed University Professor. He currently serves as the Robert C. Waggoner Professor of Economics at Harvard University.

Mullainathan’s research spans broad areas of economics: behavioral, labor, public economics and corporate finance, and most recently has focused on the intersection of machine learning and public policy. His seminal research includes topics ranging from the impact of poverty on mental bandwidth to showing that higher cigarette taxes make smokers happier.

“Sendhil is a phenomenal scholar, whose work has had great impact in a variety of fields,” said Madhav Rajan, dean of Chicago Booth and the George Pratt Shultz Professor of Accounting. “Sendhil’s history of collaboration across disciplines will strengthen ties among Booth’s research areas and deepen the school’s connections to the rest of the University.”

University Professors are selected for internationally recognized eminence in their fields as well as for their potential for high impact across the University. Mullainathan will become the 22nd person to hold a University Professorship, and the ninth active faculty member holding that title.

After completing his PhD in economics at Harvard in 1998, Mullainathan taught at Massachusetts Institute of Technology until 2004, when he moved to Harvard, where he is a professor of economics and affiliate of Harvard’s John A. Paulson School of Engineering and Applied Sciences.

“The University of Chicago has a grand tradition of defining new disciplines: the phrase ‘Chicago School of’ has its own resonance in many academic fields,” Mullainathan said.

“Today a new discipline is emerging at the intersection of human and machine intelligence. Algorithms are now capable of amazing feats, and fully harnessing their capacities requires integrating them equally with marvelous aspects of human cognition,” he added. “I’m excited to join Booth and be part of a team that will hopefully define another ‘Chicago School’ in this emerging discipline.”

Mullainathan has published more than 50 journal articles, including 14 papers in top economics journals. He recently co-authored Scarcity: Why Having too Little Means so Much and writes regularly for The New York Times. In 2002, he received a MacArthur Fellowship and serves on the board of the MacArthur Foundation.

In 2012, Mullainathan was designated a “Young Global Leader” by the World Economic Forum; was labeled a “Top 100 Thinker” by Foreign Policy Magazine, and named to the “Smart List: 50 people who will change the world” by Wired Magazine.

He helped co-found the non-profit organization ideas42, which applies behavioral science to positively change lives; and co-founded Abdul Latif Jameel Poverty Action Lab, a center to promote the use of randomized control trials in development. Mullainathan is a member of the American Academy of Arts and Sciences, and is affiliated with the National Bureau of Economic Research.

Big Brains podcast explores the future of energy, innovation with entrepreneur

Mon, 21 May 2018 11:30 -0500

Editor’s note: Big Brains is a new University of Chicago podcast in which some of the pioneering minds on campus discuss their groundbreaking ideas and the stories behind them.

When UChicago alumnus Michael Polsky first ventured into the field of renewable energy in 2003, he thought he’d missed the boat.

“When we got into renewables in earnest, I thought we were too late,” said Polsky, MBA’87, believing people were well ahead of him in building clean energy projects. Today, he said we’re barely in “the third inning” of the renewables game.

The founder and CEO of Invenergy, one of the largest renewable energy companies in North America, Polsky believes it’s not a question of if but when the United States becomes completely energy independent of fossil fuels.

It’s a seemingly unexpected turn for the former power plant engineer who arrived in the U.S. from the Soviet Ukraine in the 1970s and began his career designing power plants.

With his strong technical background, Polsky wanted to better understand the business side of the industry by getting his MBA from the Booth School of Business. He credits his time at Booth for launching him on a path to his current work, and driving his decision to support the Polsky Center for Entrepreneurship and Innovation at UChicago.

Polsky said he was ecstatic when the University approached him with the idea for the Polsky Center, calling it “a revelation” after years of preaching the importance of entrepreneurship.

On this episode of Big Brains, Polsky discusses his early days in the energy field, his current project to build one of the largest wind farms in the world and why he believes in the power of innovation.

Subscribe to Big Brains on Apple Podcasts, Stitcher and Google Play. New episodes will be available Monday mornings through the Spring Quarter.

Polsky Center helps launch biotech company from lab to real world

Fri, 18 May 2018 10:11 -0500

When Yang Zheng decided to go to business school, he knew he wanted to be an entrepreneur. Instead of launching his own mobile application or consumer product, he sought an opportunity to join up with a University of Chicago doctor and begin work on bringing a technology to market that will change people’s lives.

An MBA student at Chicago Booth, Zheng is the chief operating officer of Oxalo Therapeutics, a biotechnology company that is developing a novel drug to prevent kidney stones. Oxalo is the latest in a series of research innovations that, with the help of the Polsky Center for Entrepreneurship and Innovation, is moving from the lab to making impact in the real world.

Oxalo’s drug is based on research conducted by Hatim Hassan, a UChicago assistant professor of medicine, who studies the gut microbe that exists in some people that helps prevent kidney stones. This microbe, found in around 60 percent of people, releases factors that stimulate the intestines to remove oxalate, the toxic molecule that, when combined with calcium, causes most kidney stones. By creating a drug that mimics the factors that this bug releases, the drug aims to remove oxalate in the body and prevent kidney stones. This type of microbiome-inspired therapy is sometimes referred to as “drugs as bugs.”

On May 22, Oxalo Therapeutics will find out if it is one of the teams selected to compete in the nationally renowned Edward L. Kaplan, ’71, New Venture Challenge, in which companies present to a panel of esteemed entrepreneurs and investors.

Getting involved

Zheng got involved with the Polsky Center through programs like the Collaboratorium, which connects University scientists and researchers with business students, and the Technology Venture Fellows program. While working as an intern in the Polsky Center’s technology commercialization office, Zheng decided he was ready to take his business expertise and join a company that could make an impact.

“My criteria for whatever business I joined or started was that it would make dramatic impact in people’s lives, and in reviewing these University technologies, it seemed like biotech was the way to do that,” said Zheng. “I wanted to focus on one technology that had good potential and a good cofounder, and at the same time, Hassan’s technology was just mature enough where it was ready to be commercialized. And the Polsky Center, knowing both of our paths and our goals for the future, connected us.”

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“I was impressed with Yang’s commitment to the biotech entrepreneurship path,” said Matt Martin, microbiome innovation and ventures lead at the Polsky Center. “While Yang and I had been informally talking for a few months, he described his commitment at a time when I was looking for another person to join Hassan’s business team. It turned out to be a perfect fit.”

Zheng connected with Hassan, and they took Oxalo through the UChicago Innovation Fund in the fall of 2017, receiving $250,000 from the Polsky Center. The Innovation Fund provides funding to UChicago-affiliated ventures and technologies that have the greatest promise to benefit society. The Innovation Fund fills a critical gap in venture funding, providing early capital that is often unavailable, but is needed to help bring groundbreaking ideas to market. Oxalo also benefited from the UCGo! Startup License, a program that streamlines and simplifies the licensing process for University startup companies, shortening the timeline and minimizing the company’s legal costs.

Following the Innovation Fund, Oxalo prepared for the next step in their entrepreneurial journey: the Polsky Center’s capstone program, the New Venture Challenge.

The NVC experience

Zheng is leading Oxalo through the New Venture Challenge, which requires a UChicago graduate student as an integral part of the team. Oxalo was accepted to Phase II of the NVC in February and is now in the middle of the rigorous classroom portion—complete with mentoring, critical feedback from outside judges and investors, and business plan development.

The classroom portion of the New Venture Challenge calls for students to present their companies to the class and a rotating group of outside judges and investors multiple times throughout the quarter. A process that Zheng contends is about much more than just crafting the perfect pitch.

“Going through the process of forcing yourself to tell the story of your company to people that may or may not care, or may or may not be in your industry, is the most powerful tool of the NVC,” said Zheng. “You intimately know your business, so you get to the point where you can explain it in a million different ways for a million different audiences. If you don’t know your business to that level, you need to. And that’s what the NVC has forced us to do.”

“My criteria for whatever business I joined or started was that it would make dramatic impact in people’s lives.” MBA student Yang Zheng

While the New Venture Challenge has a 22-year history, it is only recently that the University’s venture creation and technology licensing operations were brought under one organization. The recent expansion of the Polsky Center has made companies such as Oxalo—the product of University research—even more common. While there might be a vast difference between companies such as Oxalo or past NVC winners Grubhub or Tovala, the program is designed to benefit companies, no matter their industry or background.

“Ultimately, everything is a business. It doesn’t matter if you are a new type of food or science or a mobile app, it’s a business,” said Zheng. “You need to tell a story and figure out your finances and operations and everything like that. The NVC forces you to do that, and to do it well.”

At the NVC finals, teams will compete for a comprehensive awards package totaling more than $1 million in prize and in-kind services. This year, as a result of a recent gift from Chicago Booth alum Rattan Khosa, MBA ’79, the first-place prize will be a record $150,000.

Following the New Venture Challenge, Oxalo is planning to spend the next few months fundraising and participating in additional accelerator programs to continue to build and grow their business.

“They’re at the beginning of what could be a long, 10-year journey to bring a new class of drug to market,” said Martin. “However, kidney stone prevention is a huge unmet need for those with recurrent stones, and this team is off to a great start. I’m confident that if anyone can turn this science into a new therapy, Yang and Hassan will.”

Innovation Fest to highlight pioneering discoveries, entrepreneurship at UChicago

Tue, 01 May 2018 10:00 -0500

The University of Chicago on May 1 will kick off UChicago Innovation Fest, a monthlong celebration of pioneering discovery and entrepreneurial endeavors at the University.

Led by the Polsky Center for Entrepreneurship and Innovation, the month of events, workshops and accelerator programs, including the globally recognized Edward L. Kaplan, ’71, New Venture Challenge, highlights the breadth and impact of innovation at UChicago in the areas of entrepreneurship and research commercialization, scientific advancements, and social impact. In the first two years of the program, more than 80 events were held in Chicago and in key cities across the world.

Capstone events of this year’s Innovation Fest include a panel of Chicago Booth alumni discussing the cross-disciplinary formula for a successful venture moderated by Inc. magazine editor-in-chief Eric Schurenberg, a Facebook Live event discussing the end of online privacy, a research computing symposium on how to solve societal challenges with artificial intelligence and five faculty-led teams competing for up to $500,000 in early-stage venture capital investment at the UChicago Innovation Fund spring cycle finals. This year, Innovation Fest will conclude with UChicago Alumni Weekend, a four-day program featuring more than 100 events for alumni and their families with the theme of entrepreneurship and innovation.

Launched in the spring of 2014 by the Polsky Center, UChicago Innovation Fest initially began as Innovation Week, a weeklong solution to connect the various finals competitions of the Edward L. Kaplan, ’71, New Venture Challenge. In 2016, to engage more of the UChicago community, the Polsky Center teamed up with partners in innovation across campus to create Innovation Fest as it exists today.

The University of Chicago invites all members of campus, the Chicagoland community and across the world to experience the pioneering discoveries and entrepreneurial activities happening as part UChicago Innovation Fest.

A full list of UChicago Innovation Fest events, including livestreams, can be found here.

Chicago Booth’s Douglas Diamond wins Onassis Prize in Finance

Wed, 25 Apr 2018 09:30 -0500

Prof. Douglas W. Diamond, one of the world's leading authorities on bank runs and liquidity crises who is considered the father of modern banking theory, has been awarded the 2018 Onassis Prize in Finance.

Awarded every three years, the Onassis Prize recognizes the world’s foremost academics in the fields of finance, international trade and shipping, to honor outstanding academic achievements that have had international significance. Nobel laureate and Chicago Booth scholar Eugene Fama won the inaugural prize in finance in 2009.

“I am delighted to receive the Onassis Prize,” said Diamond, the Merton H. Miller Distinguished Service Professor of Finance at the University of Chicago Booth School of Business. “After the recent financial crisis, policymakers and scholars have a renewed focus on the stability of financial institutions.”

Diamond changed the way people view banks through his pioneering research, which laid the groundwork for how central bankers, regulators, policymakers and academics approach modern finance. His research agenda for the past 30 years has been to explain what banks do, why they do it and the consequences of these arrangements.

Named after Aristotle Onassis who excelled in these three disciplines, each Onassis Prize is worth $200,000; they are sponsored by the Onassis Foundation and awarded jointly by Cass Business School London with the Onassis Foundation.

—This story first appeared on the Chicago Booth website.

Scholars in law and economics debate impact of new interest rate benchmark

Tue, 10 Apr 2018 16:50 -0500

The Federal Reserve Bank this week began publishing a new interest rate benchmark that underpins trillions of dollars in financial products, from mortgages to car loans. With the potential expiration in 2021 of LIBOR, the ubiquitous benchmark that has been a mainstay for nearly 50 years, focus is shifting to creating new—and hopefully better—benchmarks that will meet the needs of the financial community while reducing the opportunity for manipulation.

The University of Chicago Law School and the American Financial Exchange recently convened leading figures in law and economics and international finance to discuss how the new benchmark will affect rate-setting by banks, mortgage lenders, credit cards companies and other financial institutions—and the impact on hundreds of millions of consumers. The topic is of special importance to scholars of law and economics—a field born at the University of Chicago Law School that has transformed nearly every area of law.

“Our faculty is known for asking fundamental and important questions,” said Thomas J. Miles, dean of the Law School. “This conference is an example of that because it asks fundamental and important questions about our financial system: Namely, what is the true cost of money? Who should determine that cost? And how should they determine it?”

The Law School’s Coase-Sandor Institute of Law and Economics co-sponsored the April 3 symposium to begin a discussion on the transition to LIBOR alternatives being introduced. SOFR, the Secured Overnight Financial Rate designed by the Alternative Reference Rate Committee, is an overnight secured lending rate based on the U.S. Treasury repurchase agreement market; it was published by the New York Fed for the first time on April 3. Ameribor, created by the American Financial Exchange, reflects the borrowing costs of US small-and mid-sized banks using a 30-day rolling average of the weighted average daily volume in the AFX overnight unsecured market. Two years ago when AFX started, it was trading $5 million and $10 million a day with six participating banks. Today, it has 83 member institutions and has traded as much as $780 million in a single day.

“With contracts tied to LIBOR that are valued at hundreds of trillions of dollars, practitioners need to prepare for this change in the reference rate to minimize its disruption to the financial markets and ensure an orderly transition," said Richard Sandor, CEO of AFX and the Aaron Director Lecturer in Law and Economics at the University of Chicago Law School. “We need to understand what the potential transition to SOFR and Ameribor means.”

While dissatisfaction with LIBOR has been linked to scandals of manipulation that surfaced during the financial crisis, the main impetus for change is LIBOR’s instability and lack of underlying transactions, according to David Bowman, special adviser to the Federal Reserve Board and the conference’s keynote speaker.

“LIBOR is based on markets that are not robust. That means you have to rely on the expert judgment of the panel banks, and most of them on most days don’t report a value of LIBOR that is based on any transactions from that day. Rather, they base their submissions on their expert judgement of what they could have borrowed at that day,” Bowman explained.

Recently two banks left the US dollar panel, and others are questioning their willingness to continue to participate, raising the specter that LIBOR may not exist past 2021.

The impact would be enormous. About $200 trillion worth of financial contracts are written on LIBOR, of which 95 percent are derivatives and about $10 trillion are cash products. None of these contracts include language to deal with the end of LIBOR.

David Bowman, special adviser to the Federal Reserve Board and the conference’s keynote speaker, presents at the symposium. (Images courtesy of Kathryn Haviland)

“So if LIBOR stopped today, a bunch of really terrible things would happen based on existing contract language, seriously threatening U.S. and global financial stability,” Bowman said. “It’s not an allegiance to LIBOR itself, but rather how intertwined LIBOR is in a host of legacy trades; unwinding them will be difficult."

Yet, there is good news. About 92 percent of these legacy trades will roll off before 2021, and importantly—starting now—much of the risk related to LIBOR can be reduced immediately if better contract language is written into new trades, providing an economically sensible alternative if LIBOR stops functioning.

“If you write that into contracts now, you will take care of the bulk of your risk, and it would be fairly free,” Bowman said.

While ARRC has considered a number of reference rates as alternatives to LIBOR, it selected SOFR because it has become the most robust. Currently, the average notional daily volume of repo trades captured by SOFR is about $900 billion, compared with, $75 billion in the overnight Fed Funds market and $13 billion in US Treasury Bills.

“The Fed is not saying there can’t be a variety of reference rates, or that everyone has to trade SOFR, or that LIBOR can’t continue," Bowman continued. But if you want something to replace LIBOR potentially, it has to be the most robust rate you can find; it has to support $200 trillion: SOFR can do that.”

Randall Kroszner, the Norman R. Bobins Professor of Economics at the University of Chicago Booth School and a former governor of the Federal Reserve System, sees value in using different benchmarks for different situations.

“If you can use a benchmark based on transactions, you reduce the potential for bias. But if it is valuable to have a benchmark without many underlying transactions, you make the trade-off and see how the market develops. After all, LIBOR has stayed with us for a long time, despite its potential for bias,” Kroszner said. “As we think about the transition from LIBOR, we have to consider whether we want to mandate a move in a particular direction or let some spontaneous market forces develop such as the creation of the Ameribor reference rate, which was developed by Richard [Sandor] and his colleagues at AFX for small and medium-sized banks. It may not be the right benchmark for all contracts, but it could work for a certain set. ”

Kroszner suggested there could be a benchmark competition as institutions seek out different options for different circumstances: secured versus unsecured, robust versus limited. In the future, it could be very important to have multiple benchmarks so if something does change, it will make the transition easier and give regulators more flexibility to consider different alternatives.

The legal implications around the transition are large and uncertain, regardless of the benchmark that is chosen, according to Eric Posner, the Kirkland and Ellis Distinguished Service Professor of Law at the University of Chicago Law School. So a few scenarios can be considered.

“The first is, if everybody depends on LIBOR, is there any way to keep it going? Another possibility is to calculate LIBOR in a different way,” Posner said.

Most important, however, is the language in the contract.

“Dr. Bowman encouraged people—as they enter new contracts—to have a fallback with a different reference rate. If that’s the case, the courts will enforce the new term. However, it may be difficult to decide on the fallback rate. You want something that is an economic equivalent to LIBOR, but if you get it wrong, there will be a problem,” Posner explained.

Without a fallback term, it is likely the legacy contract would be upheld as frustrated and the contract would be terminated, with terms possibly being netted out. And there is always the potential, although unlikely, that the court could rewrite the contract.

“What to do about this? It’s important as people design benchmarks that they consider the long-term risks. And people who use them in contracts should think about including fallbacks and safeguards, despite the risks they create. In addition, people who establish benchmarks should be aware of the potential liability,” Posner added.

“We also have to think more about whether a regulatory agency should play a more active role in not only helping to establish benchmarks in the first place, but also in managing them as we go forward.“

An archived livestream of the conference is available here.

Stable scheduling increases sales and employee productivity, study finds

Wed, 28 Mar 2018 11:30 -0500

A new study co-authored by a UChicago scholar demonstrates that giving sales associates more stable schedules leads to increased sales and labor productivity.

Working in partnership with retailer The Gap, the interdisciplinary research is the first randomized, controlled experiment designed to shift low-wage, hourly jobs toward more stable schedules. The intervention produced a high return on investment, increasing median sales by 7 percent and labor productivity by 5 percent—challenging the widely held assumption that schedule instability for part-time and full-time employees is inevitable in the volatile retail sector.

“Scheduling practices in retail jobs are often characterized by hours that fluctuate week to week and day to day. This makes it hard to fulfill responsibilities on and off the job,” said study co-author Susan Lambert, associate professor of the University of Chicago’s School of Social Service Administration. “The results suggest that employers can improve work schedules in hourly jobs and also meet their business goals.”

The researchers define a “stable” schedule in terms of both the consistency and predictability in the number and timing of hours employees work each week. The study, which included Prof. Joan C. Williams of the University of California and Assoc. Prof. Saravanan Kesavan of the University of North Carolina, was conducted in 28 stores in the San Francisco and Chicago areas, running from November 2015 to August 2016.

In the experimental group, which comprised a randomized group of 19 of the 28 assigned stores, managers were told to give more consistent daily and weekly schedules to workers and often allowed to marginally increase workers’ total number of payroll hours.

“To date, what we find is that the move to more stable schedules improved retention among workers with more seniority who have greater knowledge of products and processes,” Lambert said. “This helps explain the productivity boost.”

In the report, the group recommends employers “take the leap to more stable scheduling” because of the business benefits, as well as the fact that several cities, including San Francisco, Seattle and New York City, have passed scheduling legislation, with comparable legislation pending in at least 13 additional municipalities.

“Continued pressure from legislatures and lawsuits mean that the time is right for employers to take the initiative to improve schedule stability in ways that work for them,” the report concluded.

Lambert praised the Gap for its commitment to the research and its willingness to try new approaches to scheduling hourly workers.

“The Gap is very much committed to making a profit and views its employees as core to that,” Lambert said. “They know that unstable work schedules make it difficult for employees to do their job well and to plan their life outside of work.”

Funding: The Stable Scheduling Study was supported by grants from the W.K. Kellogg Foundation, the Washington Center for Equitable Growth, the Robert Wood Johnson Foundation, the Institute of International Education in collaboration with the Ford Foundation, Center for Popular Democracy, the Suzanne M. Nora Johnson and David G. Johnson Foundation, and the Gap.

UChicago makes venture investment into popular Chicago food market

Thu, 15 Mar 2018 17:30 -0500

Foxtrot, the popular food and alcohol delivery service with four storefront locations in Chicago, is the fourth recipient of a venture investment from the UChicago Startup Investment Program. The company has received $450,000 from the University of Chicago as part of their $6 million Series A round, which is led by Fifth Wall.

Foxtrot joins ExplORer Surgical, Tovala and Ascent Technologies in receiving an investment from the University of Chicago through an initiative in which the University co-invests alongside established venture funds in startups led by UChicago faculty, staff, students and alumni. The University has set aside $25 million from its endowment to invest in startups raising early funding rounds.

Michael LaVitola, MBA’14, founded Foxtrot while in his first year at Chicago Booth. What started as a delivery service for fine food and alcohol has grown to four storefronts in popular neighborhoods across Chicago. When Foxtrot launched in 2013, the company had a mobile application that delivered a curated selection of items, often tailored for those entertaining—from craft beer, to fine cheese, to specialty ice cream. Two years later, Foxtrot opened their first brick-and-mortar location in Lincoln Park, and quickly followed with a space in the West Loop.

While going from mobile app to physical location might seem out of order, Foxtrot’s expansion to physical locations has allowed the company to expand their customer base while letting users interact with the products, while also serving as a distribution center. For their third location, Foxtrot also entered into a partnership with Jeni’s Splendid Ice Cream chain, featuring a “scoop shop” as part of their space on Armitage.

Like the three other recipients of the UChicago Startup Investment Program, LaVitola grew Foxtrot through the Polsky Center’s Edward L. Kaplan, ’71, New Venture Challenge.

“I came up with the idea of what became Foxtrot during my first year at Booth, but it was just an idea that I was kicking around,” said LaVitola. “I thought the New Venture Challenge would force us to get into the mix, and dedicate time to work on this plan. We were super early—all we had was a PowerPoint, though it was a good-looking PowerPoint.”

By the end of the three-month class, LaVitola had a technical cofounder to build the mobile app, a distributor to get the items and a delivery partner—the main ingredients needed to make Foxtrot a real company.

The Polsky Center’s support of Foxtrot didn’t end with the New Venture Challenge, or with LaVitola’s graduation from Chicago Booth. “Since I graduated, the Polsky Center has been extremely helpful. With things like introductions to venture firms or executives in the space or others who have been further along in the startup space, we’ve gotten a lot of our early traction through the Polsky Center network, which makes it a great place to always come back to,” said LaVitola.

Foxtrot plans to use their recent funding to grow their physical presence, with plans to finish building out Chicago and hopes to be in a new market by the end of the year. LaVitola owes much of this recent funding, which will also allow the company to grow their team from their very lean five employees, to the UChicago Startup Investment Program.

“The UChicago Startup Investment Program is a huge signal to the market. When I was out raising this round, having that commitment from the University that wasn’t a check tied to a competition but was a real investment that went through diligence from the Investment Office, sent a hugely positive signal.”

—This article originally appeared on the Polsky Center website

NYC taxi ride data suggest cozy relationship between big banks and the Fed

Tue, 06 Mar 2018 13:20 -0600

Everyone in the financial markets would like to know what U.S. Federal Reserve policymakers are thinking. Will they raise interest rates? Where do they believe that the economy is going? What is their next move, and how will it affect my pocketbook?

In a perfect world, everyone would get an answer to those questions at the same time. But new research from the University of Chicago Booth School of Business finds evidence that suggests Federal Reserve insiders systematically engaged in informal or discreet communication with the financial sector around the time of important policymaking meetings, increasing the probability of at least accidental leaks.

In the working paper, “What Insights Do Taxi Rides Offer into Federal Reserve Leakage?” Chicago Booth PhD candidate David Andrew Finer analyzed more than 500 million New York City taxi rides and finds “highly statistically significant evidence of increases in opportunities for information flow” between the Federal Reserve Bank of New York and major commercial banks around Federal Open Market Committee meetings.

“These inferred meetings might pertain to monetary policy or could be social in nature,” said Finer. “The data don’t tell us. What we do know is that every interaction entails the risk that an outside party might gain valuable insights into the Fed.”

In a nod to the power of Big Data, Finer began his work after the New York City Taxi & Limousine Commission released a dataset of more than a billion individual, anonymous cab rides in Manhattan going back to 2009. The dataset provided precise drop-off and pickup coordinates. For purposes of the study, Finer narrowed the dataset to yellow taxi rides that occurred between 2009 and 2014, omitted weekends and holidays and put other filters in place, yielding a dataset of more than 500 million taxi rides.

Among the study’s key findings:

The data yield evidence that rides from commercial banks directly to the New York Fed and offsite meetings involving insiders of the New York Fed and commercial banks increased around the time of FOMC meetings.
The data show a striking increase in rides from the commercial banks to the New York Fed almost immediately after the midnight lifting of the communications blackout. Tight restrictions on Federal Reserve staff communications are in force until midnight the day after an FOMC announcement, and rides to the New York Fed are elevated between 1 and 4 a.m. thereafter. The timing and location suggest that information pertinent to the conduct of monetary policy is being shared. The Fed might, for example, seek information on bond market conditions or provide clarification about the announcement.
Analysis of nearly coincidental drop-offs suggests that offsite lunchtime meetings between New York Fed insiders and commercial bankers increase around FOMC announcements. Coincidences are elevated from approximately the day before the announcement through a week afterward. The increase might partially reflect pent-up demand for meetings due to the blackout.
Both the post-blackout direct rides and lunchtime coincidental drop-offs were particularly elevated around monetary policy meetings in 2012, the year of the announcement of the third round of quantitative easing known as QE3.

Leaking information became an issue at the Federal Reserve in 2012 as policymakers worked to ease the effects of the Great Recession. According to the transcripts of 2012 Fed policy meetings released earlier this year, Federal Reserve Chairman Ben Bernanke had warned his colleagues at an October 2012 policy meeting that disclosure of sensitive Fed policy deliberations, even if unintentional, could damage the central bank’s credibility and reputation.

Fed guidelines prohibit officials from discussing confidential information. The rules also restrict Fed policymakers’ and staff members’ ability to speak publicly or grant interviews during the Fed’s blackout periods, which occur around FOMC meetings.

Since this study captures only New York City yellow taxi rides, Finer said he believes that the results of this study represent the lower end of possibilities for changes in interactions around FOMC meetings and that the actual number of additional occurrences might be significantly greater.

“While this research focuses on the Fed and commercial banks, it touches on far more than just opportunities for information flow between financial institutions,” said Finer. “This study provides a taste of what private ride-share companies such as Uber and Lyft can do with their data. It’s just one example of what can be learned from the data that large corporations collect on where we go and when, even if there are no clear personal identifiers.”

—Article originally appeared on the Chicago Booth website

UChicago invests in tech startup company founded by Chicago Booth alumni

Fri, 02 Mar 2018 16:07 -0600

The University of Chicago has announced their next venture investments from the UChicago Startup Investment Program. Ascent Technologies, a regulation technology company that helps users build, manage and automate their compliance programs, received $315,000 from the University as part of their Series A financing rounds.

Announced in 2016, the UChicago Startup Investment Program is an initiative in which the University co-invests alongside established venture funds in startups led by UChicago faculty, staff, students and alumni. The University has set aside $25 million from its endowment to invest in startups raising early-funding rounds. The program is overseen by the University’s Office of Investments, which manages the $7.5 billion endowment, as part of its private equity and venture capital portfolio, in collaboration with the Polsky Center for Entrepreneurship and Innovation.

To date, the program has made two venture investments. In October 2017, ExplORer Surgical, an interactive surgical playbook that promotes optimal teamwork in the operating room that is based on technology from the University of Chicago Medical Center, received a $500,000 investment as part of their $3 million Series A financing. And in December 2017, Tovala, a smart oven and meal-delivery service, received $500,000 as part of their $9.2 million round. Both companies are alums of the Polsky Center’s capstone program, the Edward L. Kaplan, ’71, New Venture Challenge.

Ascent Technologies was founded by Brian Clark, MBA’17, and Aaron Droba, MBA‘16, while students at Chicago Booth. Part of the growing field of “RegTech,” Ascent uses innovative technologies to help companies better manage increasingly-complicated regulatory compliance risk. Ascent combines a SaaS platform with intelligent content to provide customized tools and targeted advice to customers. Using artificial intelligence, natural language processing and machine learning, Ascent’s platform makes it easy for compliance officers in regulated industries to see exactly what is expected of their companies, then track and report on the steps they are taking to stay compliant.

After forming at Chicago Booth, Clark and Droba took Ascent through the Polsky Center’s New Venture Challenge in 2015‑placing as a finalist and winning $10,000 at the competition. As Clark describes, the benefits of the New Venture Challenge were far beyond the monetary prize.

“The New Venture Challenge helped put the structure around what was initially an ethereal and theoretical concept to use AI to simplify financial compliance,” said Clark. “The program provides the tools and infrastructure to turn raw ideas into a company, which has had a lasting impact for Ascent.”

Shortly after the New Venture Challenge, Ascent went on to close a $1.2 million seed round in 2016. In building its business, Ascent has continued to receive support from the Polsky Center and the University of Chicago community.

“The Polsky Center is more than the programs or even the information they provide: It’s the consistent support of the entire Polsky community,” said Clark. “As both a student and an alum, the ability to access to a community that not only is supportive, but actively seeks out ways that they can help entrepreneurs ... really helps us navigate the challenges of forming a startup and transforms what can be a middling experience to an exceptional one.”

Ascent’s latest round is led by Alsop Louie Partners. With this funding, Ascent plans to continue to invest in their automation engines to further decrease the regulatory compliance cost on businesses of all sizes. Additionally, they plan to hire significantly in the technology and sales and marketing sides of the business, and to expand their footprint in Chicago—an ecosystem they are committed to staying in and working alongside other Polsky Center-connected companies. According to Clark, the UChicago Startup Investment Program is further support for the ecosystem that the Polsky Center has helped create.

“The Startup Investment Program sets a foundation for a really intriguing model to support entrepreneurship as a student. This idea of entrepreneurship as a permanent discipline fits extremely well in the University of Chicago and Chicago Booth communities,” said Clark. “Aligning it and leveraging it with this significant capital availability is a logical extension of what the University is already doing in an excellent manner—providing resources, providing mentors, providing colocation. This is one of the last pieces of the puzzle to generating a really exciting ecosystem of entrepreneurs that is already paying dividends.”

Food deserts not to blame for growing nutrition gap between rich and poor, study finds

Wed, 14 Feb 2018 15:48 -0600

For decades, the conventional wisdom has been that people living in food deserts—defined as areas lacking in supermarkets with fresh produce and other nutritious items—have little choice but to buy unhealthy food at drugstores or convenience stores. But the data tell a different story.

A new Chicago Booth study finds that food deserts have no meaningful effect on eating habits. Exposing low-income households to the same products and prices as those in high-income households reduces nutritional inequality by only 9 percent while the remaining 91 percent of the nutrition gap is driven by difference in what shoppers prefer to buy, according to a National Bureau of Economic Research working paper published recently.

“One of the conclusions in our study is that opening a supermarket in a food desert has very little impact on the nutritional composition of households’ shopping baskets,” said Jean-Pierre Dubé, the Sigmund E. Edelstone Professor of Marketing at Chicago Booth, who co-authored the research along with New York University’s Hung Allcott and Stanford University’s Rebecca Diamond. “People in food deserts shop in supermarkets almost as frequently as people living in higher-income neighborhoods. They just travel longer distances to stores.”

The term “food desert” emerged in the 1990s when a task force in the United Kingdom observed that many low-income households in Britain lacked access to healthy foods. Instead of supermarkets carrying nutritional foods, most poor neighborhoods had only small convenience stores. Government and public policymakers worried that the small stores would lack the economies of scale to carry a broad variety of healthy food at a reasonable price. But there wasn’t much hard evidence to support these concerns.

Two decades later, with the help of big data, the researchers Allcott, Diamond, and Dubé decided to design a study that relied on actual grocery purchases to determine why the wealthy tend to eat more healthfully than the poor in the U.S.

The researchers worked with data from the Nielsen Datasets at Chicago Booth’s Kilts Center for Marketing, which include grocery purchases by some 60,000 households per year and grocery sales at about 35,000 stores nationwide from 2004 to 2015. They also included the locations of 1,914 supermarkets to study the impact that new supermarkets have on healthy eating in food deserts.

They tested whether a household’s geographic location drives food shopping preferences, to understand whether living in a food desert causes residents to purchase less nutritious food. In fact, they found almost no effect of location on purchases. Then they developed an empirical method to estimate the preferences that the households in the panel had for fruits and vegetables, as well as various nutrients such as saturated fat, sugar and salt.

Among their findings:

Households that earn less than $25,000 a year travel an average of 5 miles each way to buy groceries, clothing and household hardware, according to the data, while those that live in a food desert travel 7 miles. Even people who are poor, live in a food desert and don’t have a car still travel 2 miles.
Households in food-desert zip codes buy almost 90 percent of their groceries from supermarkets.
Wealthier households tend to place a higher value on healthy foods and nutrients, while poorer households tend to value unhealthy ones. High-income households (making more than $70,000 a year) are willing to pay almost double for the daily recommended quantity of vegetables and nearly three times more for daily recommended quantity of fruit, the researchers estimate. By contrast, low-income households (making less than $25,000 a year) are willing to pay more for sugar and saturated fats.

As part of the study, the researchers also developed a health index to measure the nutrition content of households’ grocery purchases. The index improved five times more for high-income households than it did for low-income households between 2012 and 2015, compared to 2004 through 2007—indicating the nutritional gap between the rich and the poor is growing.

The authors also found that education and nutrition knowledge are strongly associated with the differences in preferences across income groups. While these findings are not causal, they may suggest that policies aimed at nutrition education may be more effective at closing the nutrition gap than subsidies and grants meant to encourage building more supermarkets and farmers markets in food deserts.

“Food knowledge and education seem to explain a big chunk of the preferences for what people buy when they shop for groceries,” said Dubé. “If you are educated about the long-term benefits of nutrition, it could affect your shopping behavior.”

—This story originally appeared on the Chicago Booth website

Universal basic income policies don’t cause people to leave workforce, study finds

Wed, 14 Feb 2018 10:00 -0600

New research from the University of Chicago Harris School of Public Policy suggests that a universal basic income would not cause people to leave the workforce.

Such proposals, including one considered by Hillary Clinton during her 2016 presidential campaign, include direct payments that ensure each resident has a baseline of income to provide for basic needs. While previous research has focused on the effects of these unconditional cash transfers at the micro level—for example, winning the lottery— this study examined their large-scale impact by looking a government program that has supported Alaska residents for the past 25 years.

In a working paper released Feb. 12 by the National Bureau of Economic Research, Assoc. Prof. Damon Jones of Harris Public Policy and Asst. Prof. Ioana Marinescu of the University of Pennsylvania School of Social Policy and Practice (formerly of UChicago) examined the effect of unconditional cash transfers on labor markets using the Alaska Permanent Fund Dividend—a payout from a diversified portfolio of invested oil reserve royalties, established in 1982. They concluded unconditional cash transfers had no significant effect on employment, yet it increased part-time work.

“It is reasonable to expect an unconditional cash transfer, such as a universal income, to decrease employment,” Jones said. “A key concern with a universal basic income is that it could discourage people from working, but our research shows that the possible reductions in employment seem to be offset by increases in spending that in turn increase the demand for more workers.”

With only a few exceptions, every Alaskan who has been a resident for at least 12 months is entitled to a dividend from the Alaska Permanent Fund, which as of August 2017 is worth nearly $61 billion. In recent years, the payment, which residents receive through direct deposit, has averaged about $2,000 a year in a lump sum. But because it is a per-person amount, a household of four could receive more than $8,000.

Jones and Marinescu examined the effects of a large number of people receiving a cash transfer. Notably the researchers found that:

There is no significant effect, positive or negative, on employment as a whole, although part-time work does increase by 1.8 percentage points, or about 17 percent.
There is a difference in the effect of the unconditional cash transfer in sectors that produce goods or services that can be traded outside of Alaska and those that cannot. Part-time work increases and employment decreases in the tradable sector, but the effects in the non-tradable sector are insignificant.
Any negative effects in the non-tradable sector, meanwhile, are offset by positive macro effects.

Jones and Marinescu conclude that more research needs to be done to analyze universal basic income proposals, including the effects of proposed funding models and possible impacts on the prices of local goods. They found that a major component, called the unconditional cash transfer, has no effect on aggregate employment.

Study uncovers gender gap in earnings of Uber drivers

Thu, 08 Feb 2018 15:15 -0600

UChicago economists helped lead a study that found men working for the ride-sharing platform Uber earned about 7 percent more per hour than women.

Workers in the growing “gig” economy—work done on a contract or freelance basis—have flexibility that some experts speculated could favor women. Yet despite Uber’s gender-blind algorithm for work assignments, the study of nearly two million U.S. drivers found the wage gap resulted from three factors: experience using the Uber platform, preferences over where and when to work, and the willingness of men to drive faster—and ultimately complete more trips.

“When starting the research we could see it going either way: Women might earn a bit less because they would want to work at specific, and potentially less lucrative, times that fit their other obligations better. Alternatively, women tend to work fewer hours so they might have a chance to cherry pick and focus their hours during the most lucrative times,” said John A. List, the Kenneth C. Griffin Distinguished Service Professor in Economics at UChicago, a co-author of the working paper released Feb. 6. “The value of learning on the job and the importance of driving speed, and how such forces affect the genders differently, was surprising.”

List and economists at Stanford University and Uber examined the driving records of 1.8 million drivers in 196 U.S. cities, more than 500,000 of whom (about 27 percent) were female. Men in the study earned $21.28 an hour while women were paid $20.04 an hour—a larger gap than found in previous studies of pharmacists and MBA graduates. Although there doesn’t appear to be anything built into Uber’s platform that would favor men, the study revealed details about the three factors behind the pay disparity:

Male drivers work more: 17.98 hours a week compared to 12.82 a week for women. This gives men an edge in learning how to choose potential passengers based on how far the driver has to travel to pick them up, the distance to the intended destination and other factors that can influence pay. The researchers found that, until about their 2,500th trip, drivers are learning those skills can maximize pay. A fully experienced driver earns about $3 more an hour than a driver with 500 or fewer trips.
Men were more likely to drive in areas and during times in which pay is higher. “We expected women would avoid certain times of the day because they would not want to confront drunk riders or the like,” List said.
Men drive 2.2 percent faster than women working for Uber. That increases the number of trips they can fit into the hours they work. Previous research backs up a higher degree of risk tolerance among men than women.

Any changes Uber might make to try to close its wage gap might be counterproductive, List said. The current system rewards experience, which he calls “good for everybody.” List, who also is a consultant with Uber, said the company plans to use the results to make the experience better for consumer and drivers.

“Supposing they can do so safely, both riders and drivers would prefer to arrive at the destination sooner,” List said. “It is an important but complicated issue to determine what is the ‘right’ gap, in terms of fairness and overall happiness of the various stakeholders.”

Along with Prof. Paul Oyer and Asst. Prof. Rebecca Diamond of Stanford University, List worked on the study with Uber Director of Policy Jonathan Hall and Uber data scientist Cody Cook. Cook is a University of Chicago undergraduate student in economics.

UChicago food allergy startup ClostraBio raises $3.5 million

Wed, 10 Jan 2018 16:00 -0600

Prof. Cathryn Nagler had been researching the physiological origins of food allergy and potential treatments for over 30 years, but she hadn't considered the possibility of translating that research into a business. But just 15 months after considering that possibility and beginning her entrepreneurial career, she is the founder of a promising, emerging venture.

Nagler’s new venture, ClostraBio, has made use of a variety of programs and resources offered by the University of Chicago’s Polsky Center for Entrepreneurship and Innovation and University partners such as the Institute for Translational Medicine and the Institute for Molecular Engineering. And most recently, the company, headed by Nagler, the Bunning Food Allergy Professor; co-founder Jeffrey Hubbell, the Eugene Bell Professor in Tissue Engineering; and John Colson, a former Institute for Molecular Engineering postdoctoral scholar, closed on a $3.5 million seed financing round.

ClostraBio aims to develop drugs that will enable patients living with food allergies to eat without fear of an allergic reaction by harnessing protective bacteria and the substances they produce in the complex microbiome of the gut. These keep the gut’s lining healthy and create a barrier that stops allergens from entering the bloodstream and inducing an allergic response.

John Flavin, associate vice president for entrepreneurship and innovation at the University of Chicago and head of the Polsky Center, saw the promise in Nagler’s research early on and connected her to the Polsky Center’s innovation pipeline.

“Between Cathy’s scientific discoveries and Jeff’s applied research, ClostraBio had all the makings of a successful commercial enterprise from the beginning,” said Flavin. “The Polsky Center has been there every step of the way to guide the ClostraBio team, from an initial discovery in a lab to a fully operational startup now with venture funding needed to prepare for clinical trials.”

Building a venture

ClostraBio’s first experience with the Polsky Center was through the Innovation Fund, though at first not through an investment. The Innovation Fund, managed by the Polsky Center, provides not only early capital to groundbreaking UChicago ventures and promising technologies, but has personnel that serve as venture capital associates and perform due diligence on projects that the fund might invest in.

Jason Pariso, director of the Innovation Fund, connected Nagler with Colson, who had come to the University of Chicago looking to get involved with an entrepreneurial venture. Colson joined ClostraBio as a project manager while finishing his postdoctoral work with the IME, and now serves as the company’s director of operations.

Before ClostraBio could continue building their business, Nagler had to navigate a series of complex rules and regulations regarding conflict of interest when commercializing research from a university laboratory.

“It was very important that we establish clear boundaries between my NIH-funded academic research and the commercialization efforts undertaken by ClostraBio so that we not inadvertently misuse university facilities and grants,” said Nagler. “We worked with University Research Administration and the Polsky Center to create a conflict of interest management plan that fully addressed this situation.”

As the Polsky Center supports the University’s efforts to foster a culture of innovation and encourage researchers like Nagler to join the innovation pipeline, the Polsky Center is taking steps to remove hurdles like that Nagler faced. The recently announced Polsky Center innovation complex will offer space, separate from the University's research facilities, to researchers for their commercial ventures.

“The new Polsky Center complex would enable us to physically separate the work that we do academically from the more commercially focused work,” said Nagler. “We’re looking forward to having the expertise and resources for commercialization available at the Polsky Center right next door to our research labs.”

Securing funding

In the fall of 2016, ClostraBio was accepted into a cohort of the Polsky Center’s I-Corps program. Supported with funding from the National Science Foundation and run by the Polsky Center, I-Corps is a seven-week program that allows UChicago scientists, researchers and students to test the commercial potential of their research and ideas.

That same fall, ClostraBio participated in the Polsky Center’s annual Collaboratorium networking event, which resulted in their recruiting two Chicago Booth MBA students to their team—allowing ClostraBio to prepare for their next stop on the Polsky Center’s innovation pipeline, applying to the nationally-ranked Edward L. Kaplan, ’71, New Venture Challenge.

ClostraBio was accepted into Phase II of the NVC in February, where they embarked on a rigorous classroom portion—complete with mentoring, critical feedback from outside judges and investors, and business plan development.

Happening in tandem this past spring, ClostraBio was chosen as a finalist for the spring cohort of the Innovation Fund. While participating in the NVC class and honing their business model, the ClostraBio team was also preparing to present at the Innovation Fund Spring Finals—which happened the day prior to the New Venture Challenge finals, a consequential event they would be presenting at as one of the top 11 teams chosen.

ClostraBio found success with their back-to-back presentations—receiving up to $200,000 from the Innovation Fund, and 4th place and $40,000 in the New Venture Challenge. Beyond the critically important funding, these programs went a long way in setting up ClostraBio for future success.

“The New Venture Challenge and the Innovation Fund both challenge you to think critically about the business and directly address potential challenges, and they do this in complementary ways,” said Colson. “The Innovation Fund has a great deal of expertise in biotech as well as a team of student associates doing diligence in real time, so you are able to get market feedback independently, then use that data to fine tune story and strategy. The New Venture Challenge challenges you to communicate your business in new ways and you get feedback not only on strategy and your business plan, but also on how you tell your story.

“It's pretty amazing to go from the first in-class pitch where it’s a struggle to communicate the concept and the judges can't follow,” Colson added, “to having a second in-class pitch that gets them excited and sitting in the front of their chairs eager to hear more, not just because the business plan is compelling, but because the story rings true.”

Since competing in these programs, ClostraBio has continued to work out of the Polsky Exchange as part of the Polsky Incubator, and recently became the newest signee of a UCGo! Startup License. Created in 2015, the UCGo! Startup License is an optional, standardized license agreement to increase entrepreneurship at the University.

ClostraBio’s growth has attracted the attention of other investors. Joe Mansueto, AB’78, MBA’80, the founder of Chicago-based investment research company Morningstar Inc., and Daniel and Angela Oakey, a Virginia-based couple whose children suffer from severe food allergies, have joined with previous investors and the previous funds from the University of Chicago to complete ClostraBio’s $3.5 million seed round.

The company plans to use this first round of outside capital to take the drug through additional animal testing, before commencing human trials.

—This story first appeared on the Polsky website.

Leaders give advice for managing change on Chicago Booth panel

Thu, 21 Dec 2017 15:51 -0600

Initiating, managing and implementing change is one of the hardest challenges for any leader. How do you get people to accept a new idea as valuable and worthy of their attention? What can leaders do to help their organizations embrace change?

These are the questions leaders in the arts, government and corporations gathered to discuss this fall at the Harry L. Davis Center for Leadership at the University of Chicago Booth School of Business.

“My sense is that leaders face a real challenge of both deciding what should change, and also what should not change,” said Harry L. Davis, professor of creative management and director of the Center for Leadership. “To me, that is one of the great challenges of leadership.”

The panel discussion, entitled “Leading Change,” was moderated by Hal Weitzman, executive director of intellectual capital at Chicago Booth. The event was part of the Center’s Perspectives in Leadership Series.

How should you manage change?

Video of How should you manage change?

How should you manage change?

The panelists, all of whom have led dramatic change at their own organizations, included:

Fred Hochberg, former chairman and president of U.S. Export-Import Bank and a Pritzker fellow at the University of Chicago’s Institute of Politics. Hochberg streamlined transaction processes and brought a customer focus to the federal agency that provides credit assistance to exporters, reforms that allowed the agency to thwart political pressure to shut it down.

Jenny McColloch, director of sustainability strategy and engagement and business integration at McDonald's Corp. McColloch and her colleagues have worked to bring global sustainable food sourcing to the world’s largest restaurant chain, starting with changes in the beef industry.

Ashley Wheater, artistic director of the Joffrey Ballet. Last year, Wheater unveiled a dramatic restaging of the “The Nutcracker,” a Christmas tradition in Chicago that, until then, had remained the same for 30 years.

The panelists discussed how they approached big, fundamental changes in their own organizations and shared practical advice on how to overcome the inherent challenges of leading change.

Here are the panelists’ top eight tips:

Find the right pace: You have to figure out how to introduce change at a rate of speed that your organization can handle. If you move too slowly, you lose momentum. If you go too fast, you lose everybody.
Identify some early wins: You need some early wins because that builds momentum. Start with a small pilot program. If it goes well, celebrate those smaller changes before embarking on larger ones.
Adjust course as you go: Lay out your vision, then get out of the way and allow your teams to move forward. You can adjust course as you go. Avoid the pitfall of letting your perfect concept of the vision get in the way of making progress.
You need a lot of patience, but not too much: You need to have enough endurance and staying power that people realize you aren’t going to go away and that the request for change isn’t going to go away. You also need some urgency. There is nothing like an external threat to get everybody focused and motivated to change. Whether it's the prospect of losing funding or the challenge of losing customers to a competitor, an outside threat can create that sense of urgency.
Demonstrate your authenticity: Be an authentic leader and show that you truly care about an organization and that you want the institution to flourish. Frequently the people most resistant to change are those workers who have been at the institution a long time and really are committed to the organization. You can win over many skeptics if you can convince them that you too really care about the organization, and that you are making changes not for your own personal gain, but so that the organization can prosper.
Find ambassadors: Rather than taking a top-down approach, identify people within your organization who are willing to try something new, and then figure out how to position those ambassadors where they can influence their peers. Finding these first-mover leaders will help build a movement towards change.
Repetition, repetition, repetition: You have to repeat your vision for change over and over again. You have to repeat it in every speech you make, in every tweet you tweet. The leaders in your organization need to be talking about it every day.
Become comfortable with the uncomfortable: It takes a lot of passion, persistence and patience to bring about change. While change is exciting, it is not a popularity contest.

For more, watch part of the panel discussion that took place at the Gleacher Center in downtown Chicago in this special edition of The Big Question, the monthly video series from Chicago Booth Review.

—This article originally appeared on the Chicago Booth website

Symposium connects diverse firms with University, South Side decision-makers

Fri, 15 Dec 2017 11:15 -0600

The promise of new opportunity was in the air for representatives of 230 minority- and women-owned firms attending the University of Chicago’s 2017 Professional Services Symposium reception.

“The symposium puts you in the room with key decision-makers,” said Diane Primo, CEO of Intralink Global, a digital integrated communications agency. “Anyone in business knows that’s a tough thing to do. It says a lot about the University’s commitment to put that kind of power in the room.”

Established in 2009, the two-day annual event helps minority and woman business owners make face-to-face contact with top leaders across many University departments. As a result, the University has established contracts with 70 minority- and women-owned firms with a focus on professional services, and has made high-level contacts with about 250 more. Such firms constitute one of the fastest growing portions of the economy, said Nadia Quarles, UChicago’s assistant vice president for business diversity. Quarles said the University has already retained a firm that participated in this year’s event.

“These diverse partnerships have provided talent, skills and innovation to support the University’s academic excellence,” said President Robert J. Zimmer. “Cultivating a campus climate that welcomes people of all backgrounds is imperative for the work and the character of the University of Chicago.”

A national model

UChicago’s Office of Business Diversity annually invites 25 to 30 minority- and women-owned firms to make business presentations before heads of communications, financial services, legal, information technology and money management. The symposium is seen as a national model, said Quarles, because it provides a forum for business owners to build direct relationships with senior level decision-makers.

The finale of this year’s symposium was held in halls at the UChicago Laboratory Schools named after two highly successful minority entrepreneurs—filmmaker Gordon Parks and Ariel Investments CEO John Rogers Jr. It featured a networking reception and “fireside chat” with Connie Lindsey, Northern Trust’s executive vice president and head of corporate social responsibility, global diversity and inclusion; and William Von Hoene, senior executive vice president and chief strategy officer for Exelon Corp.

Lindsey and Hoene are co-chairs of the Obama Foundation’s Inclusion Council, whose responsibility is to ensure diversity and inclusion are considered at each level of the Obama Presidential Center’s development, from construction to professional relationships to employment. As an important University neighbor, the foundation was invited to participate in this year’s symposium, both to cultivate best practices and to establish relationships with diverse business owners.

Looking at the symposium’s high turnout, Hoene said: “This reflects the potential of our work, business and society. If we don’t seize the opportunity to have the talents of everyone recognized, appreciated and put on an even table, then we can never be successful. This is our key to success.”

The future landscape requires courage from top leaders to work for greater change in business, Lindsey said. “We can never stop seeking, knocking, asking and demanding our place at the table.”

“This year, we invited new firms and University leadership who haven’t been here before, and that keeps it exciting,” said Quarles. “Having the Obama Foundation in on meetings was also new and added to the excitement.”

“This is the largest crowd we ever had,” said Rogers, a trustee to the University of Chicago who has built the largest African-American-led money management firm in the country. “There’s a lot of energy and a buzz. It shows you that we are having results. People are busy. For them to come back year after year during the holiday season means that something really special is happening here at the University of Chicago. People are getting a real chance to do business.”

Prof. Richard Thaler delivers Nobel Prize lecture

Fri, 08 Dec 2017 13:37 -0600

Until Prof. Richard H. Thaler came along, economists resisted the idea of basing their models on how real people behave. The reality is people don’t always know what they want, much less what’s best for them.

In October, Thaler was honored with the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel for his pioneering scholarship in the field of behavioral economics. On Dec. 8, the Chicago Booth scholar delivered his Nobel lecture in Stockholm as part of a weeklong celebration of the 2017 Nobel laureates. He will receive his Nobel Medal on Dec. 10 at a white-tie-and-tails affair at the Stockholm Concert Hall. (Live webcast begins at 7:30 a.m. CST here).

In his Nobel speech, entitled “From Cashews to Nudges: The Evolution of Behavioral Economics,” Thaler told stories of various field experiments in his everyday life—ranging from a dinner party as a graduate student in Rochester, N.Y. in the 1970s to the Swedish government’s present-day effort to get its citizens to sign up for retirement plans.

Prof. Richard Thaler delivers the 2017 Nobel Prize Lecture in Economic Sciences on Dec. 8. (Photo by Henrik Montgomery / TT)

“One lesson from these stories is that there are a bunch of things economic theory says we can leave out, and in fact, makes the strong prediction that they simply will not matter,” Thaler said in his Nobel address. “I call these ‘supposedly irrelevant factors.’ And really my research can be summarized as there are a lot of these supposedly irrelevant factors that are not irrelevant. They matter.”

Thaler launched his journey as one of the founders of behavioral economics with a bowl of cashews at a dinner party. He was concerned his guests were eating too many and that it would spoil their appetites, so he took them away. His guests, all economists, were happy when he removed the nuts, and that led to a discussion: How could they be happy, given that a first principle of economics is more choices are better than fewer choices?

“If we learn from other social scientists, we can improve economics and increase its explanatory power, and it can give us new tools we can use to improve people’s outcome. In short, we can nudge them.”Prof. Richard H. Thaler

Prof. Richard Thaler to receive Nobel Prize this weekend

Wed, 06 Dec 2017 12:29 -0600

Nearly two months have passed since a 4 a.m. call from Sweden changed the life of economist Richard Thaler.

That morning, Thaler called receiving the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, the culmination of “a long journey” of scholarship. Known as one of the founding fathers of behavioral economics, Thaler, the Charles R. Walgreen Distinguished Service Professor of Behavioral Science and Economics at the University of Chicago Booth School of Business, said his field had come a long way since being “out in the wilderness” 40 years ago.

“When you’re doing research that’s a little unusual, and your approach is unusual, and you’re criticizing some of the other people in the field, you never know whether anybody’s taking it seriously,” said Thaler, who is in Stockholm, Sweden this week to receive his award.

Thaler will deliver the Nobel Prize Lecture in Economic Sciences on Dec. 8 and receive his Nobel medal on Dec. 10. (Both events will be webcast live on the Nobel website.) Thaler is the 90th scholar associated with UChicago to be awarded a Nobel Prize and sixth current member of the UChicago faculty.

“The last month has been frenetic, so I don’t know if it has sunk in,” Thaler said. “I’m not sure it will sink in until I get back from Stockholm.”

A view of the Stockholm Concert Hall, where Prof. Richard Thaler will receive his Nobel Prize medal during a Dec. 10 ceremony. (Photo by Frank Augstein/Associated Press)

‘A speech to the general public’

Author of the best-selling book Nudge, Thaler is renowned for research showing how human behavior contradicts traditional economic logic. And much like his groundbreaking scholarship, Thaler will be taking a different approach to his Nobel lecture.

Charged with delivering a 35-minute Nobel address, Thaler hopes to make it visual and “not bogged down in technical details.” Thaler knows a few things about writing a Nobel lecture, having heard five Nobel lectures in the two times he’s attended the ceremony—including 2002, when friend and former Stanford University colleague Daniel Kahneman was honored.

“Thirty-five minutes is not that long, and I don’t talk that fast. For the speech, I’m just trying to think about what is the best introduction of this material for 500 to 800 mostly Swedish residents of Stockholm,” Thaler said. “It’s not a speech to experts; it’s not a speech to my colleagues—it’s a speech to the general public.”

Thaler described the day the Nobel Prize was announced on Oct. 9 as a blur. He recalls the flood of congratulatory messages and a news conference at Booth, but also teaching a class that night at the Gleacher Center.

The work of a scholar, Nobel-winning or not, never ends. Soon after Stockholm, Thaler will return to research and tackling the task of writing a technical research paper for Nobel, due Jan. 31, which will be published in the American Economic Review.

“When you wake up in the morning, you still have to brush your teeth and take a shower—and pretty much life goes on,” Thaler said. “People have asked me: ‘Do your colleagues treat you any differently?’ No. They may have cut me slack for 10 or 15 minutes, and then it’s back to normal.”

Study asks: How much should a victim be compensated for emotional suffering?

Tue, 28 Nov 2017 16:51 -0600

If a company sends one of its workers to a crime-ridden neighborhood to repair a leaking roof and the worker is held up by gunpoint, has his wallet stolen and is so terrified that he can’t return to work, how much should that victim receive for his emotional suffering?

If the worker had no money in his wallet when it was stolen, chances are people would say he deserves a lot more financial compensation for the fear he experienced than if he had $50 stolen.

When assessing total compensation for a victim, the presence of a small economic loss “crowds out” the presence of an emotional loss, according to new research from the University of Chicago Booth School of Business Professor Christopher Hsee and PhD candidate Shirley Zhang.

In the study, “Small Economic Losses Lower Total Compensation for Victims of Emotional Losses,” forthcoming in the January issue of Organizational Behavior and Human Decision Processes, the researchers find that people are inclined to reward considerable compensation for emotional loss if that is the only loss. But when a small economic loss accompanies the emotional loss, that fact lowers the total compensation award recommended.

At the same time, if the loss is so small as to be trivial—$1 instead of $50—the researchers find that people tasked with awarding damages look at the scenario as if there were no economic loss at all and focus solely on the emotional loss.

“Unlike an economic loss, emotional loss is hard to evaluate and prone to biases,” said Hsee. “When a victim incurs only an emotional loss, people will base compensation on how much they feel the emotional loss is worth. But if the victim also incurs an economic loss, people will anchor on that measurable economic loss and make their compensation decision based on that amount.”

The researchers conducted a series of four experiments in diverse contexts from car accidents to mugging to harassment and in which the size of the economic loss varied. Across the many different scenarios, the findings were the same: A smaller economic loss dragged down the total compensation.

The results suggest that when victims are seeking damages for emotional losses, they would fare better financially if they refrain from mentioning economic losses, unless the economic loss is particularly large.

“It would be better to say, ‘I was so scared that I lost two nights’ sleep,” than to say, ‘I was so scared that I lost two nights’ sleep and one day’s work,’” the study says. “If the victim mentions one day’s work, the mediator would likely compensate the victim for only her one day’s pay. If the victim does not mention one day’s work, the mediator would likely award more.”

Compensation for emotional issues isn’t just a legal issue. It is also a psychological issue. Understanding the lay attitude toward emotional loss sheds light not only on how mediators make compensation recommendations, but also, more broadly, on how laypeople treat emotional factors in decisions in general.

—Original release appeared on the Chicago Booth website

UChicago announces $125 million gift to support economic scholarship

Wed, 01 Nov 2017 00:01 -0500

Note: This story has been translated into Spanish and Chilean Spanish.

The Kenneth C. Griffin Charitable Fund intends to make the second-largest gift in the history of the University of Chicago, supporting the Department of Economics in expanding its leadership in education and research with wide-ranging public impact, while increasing financial support for students.

The $125 million gift, which will bring Griffin’s total giving in support of UChicago Economics to nearly $150 million, will help advance the department’s efforts to impact the world through economic inquiry and analysis.

The University of Chicago’s distinguished history includes 29 scholars associated with the University who have received the Nobel Memorial Prize in Economics. The gift will support the development of future leaders in the field of economics by expanding resources for faculty, providing critical financial aid for undergraduate and graduate students, and creating a research incubator. In recognition of this gift, the Economics Department will be renamed the Kenneth C. Griffin Department of Economics.

“The University of Chicago has a long history of groundbreaking and deeply impactful scholarship and education in the field of economics that continues today. This generous gift will enhance the scope and global impact of faculty research and support new access to the challenging intellectual environment that defines a University of Chicago education,” President Robert J. Zimmer said.

“The University of Chicago has transformed our understanding of economics. Over the past century, the faculty and students have challenged the status quo to produce pioneering research and path-breaking ideas, which have been recognized by the 29 Nobel prizes in the field of economics awarded to individuals associated with the University,” Griffin said. “I am proud to support the extraordinary work of the Economics Department and a university so fundamentally committed to free expression, fierce debate and intellectual pursuit. The culture of rigorous questioning and open discourse at the University of Chicago has opened minds to ideas that have changed the world.”

Griffin is the founder and chief executive officer of Citadel, one of the world’s largest alternative asset managers. He is a committed philanthropist with a deep history of supporting world-class institutions in the areas of education, arts and culture, and economics. Griffin joined the University’s Board of Trustees in 2014.

The new gift will support scholarships for third- and fourth-year students in economics through the University’s Odyssey Scholarship Program and provide stipends to graduate students and support for graduate research. It also will support new and ongoing research by faculty and grow the size and enhance the preeminence of the department. This includes the launch of the Kenneth C. Griffin Applied Economics Research Incubator, which will focus on new strategies to strengthen the understanding and impact of economics.

“It is difficult to find an area of life or a problem faced by humanity that isn’t rooted in economics, from educating children to preventing war to fueling life-changing innovation. The gift is a commitment to the science of economics and research that confronts the most pressing issues facing society,” said John List, chair of the Department of Economics and the Kenneth C. Griffin Distinguished Service Professor in Economics and the College.

The future of economics at the University

The gift comes at an exciting time for the field of economics as advances in computing power, the scope and depth of data, and measurement techniques are taking scholars in unexplored directions. The resources provided by the gift will support faculty and students alike as they develop and deploy these emerging tools.

“The gift focuses on the future of economics at the University, building on a tradition of challenging conventional thinking and pioneering new ideas. It increases the momentum of giving to the University led by a strong commitment from trustees,” said Joseph Neubauer, MBA’65, chair of the University’s Board of Trustees.

“This generous gift will enhance the scope and global impact of faculty research and support new access to the challenging intellectual environment that defines a University of Chicago education.” President Robert J. Zimmer

While focused on the Economics Department, the gift will provide opportunities for interdisciplinary collaboration across the University, particularly through the Economics Research Incubator.

“This extremely generous commitment will immeasurably benefit the Economics Department, as well as work in social sciences across campus. Given our culture of ‘low walls’ between disciplines, and the vitality and importance of economic approaches across fields, this gift will have broad influence across the University," said Amanda Woodward, interim dean of the Division of the Social Sciences and the William S. Gray Distinguished Service Professor of Psychology.

The gift is the second largest in the University’s history. The largest is a $300 million gift made in 2008 by David G. Booth, MBA’71, for whom the University’s Booth School of Business is named.