Archive for July 7th, 2020

Why Japanese Businesses Are So Good at Surviving Crises

July 7, 2020

Dina Gerdeman has a nice piece in HBSWK:

On March 11, 2011, a 9.1-magnitude earthquake triggered a powerful tsunami, generating waves higher than 125 feet that ravaged the coast of Japan, particularly the Tohoku region of Honshu, the largest and most populous island in the country.

Nearly 16,000 people were killed, hundreds of thousands displaced, and millions left without electricity and water. Railways and roads were destroyed, and 383,000 buildings damaged—including a nuclear power plant that suffered a meltdown of three reactors, prompting widespread evacuations.

In lessons for today’s businesses deeply hit by pandemic and seismic culture shifts, it’s important to recognize that many of the Japanese companies in the Tohoku region continue to operate today, despite facing serious financial setbacks from the disaster. How did these businesses manage not only to survive, but thrive?

One reason, says Harvard Business School professor Hirotaka Takeuchi, was their dedication to responding to the needs of employees and the community first, all with the moral purpose of serving the common good. Less important for these companies, he says, was pursuing layoffs and other cost-cutting measures in the face of a crippled economy.

“Many Japanese companies are not that popular with Wall Street types because they are not as focused on gaining superior profitability and maximizing shareholder value,” he says. “They talk consistently instead about creating lasting changes in society.”

Their reward for thinking beyond profits? These businesses tend to live a long time. In fact, on a global map, Japan stands out for corporate longevity; 40 percent of companies that have remained in existence more than 300 years are located in the country, according to Takeuchi’s research.

Based on interviews by Takeuchi (pdf) and his HBS students, who have studied businesses rebuilding in Japan for nine years, here’s a snapshot look at how the leaders of four companies jumped into action soon after the tsunami devastated the area.


Will Universities Learn from the current crisis?

July 7, 2020

Prof Ken Rogoff in this piece writes how he saw video learning will reshape univ learning 40 years ago but this did not happen. Will the current crisis change things?

When I was a graduate student 40 years ago, I was convinced that video learning (the technology of the day) would reshape university teaching. After all, I thought, why shouldn’t students around the world have access to the best lecturers and materials, particularly given that on-campus lectures to 200 students or more offer extremely limited scope for personal interaction anyway?

To be sure, in-class teaching would still have an important role to play. Professors would still curate materials and answer questions. And I did not envisage recorded lectures substituting for smaller classes (although taped materials can of course work in that setting, too). But while it is thrilling to watch a great class in person, surely a good taped lecture is better than a mediocre in-person one.

Fast forward four decades, however, and progress has been limited. One likely reason is university governance: faculty run these institutions, and few are inclined to go down a path that would reduce demand for their services. Professors are no doubt also worried that taped classes would make it harder for their graduate students to find jobs. And graduate students, with their energy and fresh ideas, are key drivers of research.

Demographic shifts have long been putting downward pressure on college enrollments. Even if faculty in some fields (such as computer science) still see robust demand, for many others, declining student numbers surely amplifies resistance to labor-saving new technologies.

But perhaps the biggest obstacle is the high cost of producing high-quality taped lectures that satisfy students as much as in-person classes. Producing even a single lecture for mass consumption is a risky and time-consuming proposition. And because recorded lectures are so easily cloned, it may be difficult to charge a high enough price to cover the costs. A plethora of education startups (including many in and around the Boston area, where I live) are trying to solve these problems, but so far have not had a major impact on the system.

It therefore seems reasonable to ask whether the United States government should take on the costs of creating basic pre-taped or online college lecture materials in certain fields. (The same could be done for adult education courses.) In particular, introductory online course materials in apolitical subjects such as mathematics, computer science, physics, and accounting should be prime candidates for federal funding.

Many other academic disciplines, certainly including my own field of economics, also have great online potential. Democratic US presidential candidate Joe Biden now supports making college free, which thrills some professors. But, rather than expanding the existing US university system, wouldn’t federal funding for online learning be a fairer and more efficient way forward, especially given that it can help adults of all ages?

Revisiting the economic thought of Prof K.N.Raj

July 7, 2020

Good friend Prof Aex Thomas of APU makes a case for studying works of KN Raj and History of Economic Thought in general:

In economics, there are classic texts which are frequently mentioned but seldom read. The subfield of history of economic thought (HET hereafter) is one arena where these path-breaking texts are systematically studied. A close study of the classic works of Adam Smith, Karl Marx, Alfred Marshall, and John Maynard Keynes will make it abundantly clear that economic ideas do not evolve in a linear manner whatsoever, and that the work of Smith cannot be viewed as an inferior version of Marshall’s as is generally believed. While there exists some interest in systematically studying the works of Smith, Ricardo, Marx, and Keynes, the same cannot be said for the work of Indian economists such as B. R. Ambedkar, Krishna Bharadwaj, Kanta Ranadive, and V. K. R. V. Rao, to name a few. It is in this spirit that I wish to engage with the work of K. N. Raj.

More power to likes of Alex for furthering the cause of studying works of Indian economists..

Why Hong Kong will remain an international financial centre, despite new security law

July 7, 2020

Fair bit of articles being written on the ongoing crisis in Hong Kong leading to the island city losing its premium status as an international fin centre.

Horace Yeung (University of Leicester) and Flora Huang (University of Derby) in this piece do not agree with this premise:

While we cannot underestimate some individuals’ fears that they may be arbitrarily detained under the new national security law, there is also evidence that the law will curb the social unrest that has been detrimental to business in Hong Kong. Crucially, our research supports the idea that Hong Kong’s legal system remains stronger than China’s for international business activity. This will ensure it has a competitive edge over China for the time being.

Under Article 8 of the Basic Law of Hong Kong, which serves as the city’s de facto constitution, Hong Kong has a common law system that it inherited from the UK. In this kind of legal system, judges have the ability to make laws in the form of case law, which is determined by rulings on legal precedents. This makes Hong Kong’s legal system much stronger than China’s civil law system, where vast numbers of laws have been written in recent decades but have not necessarily been tried, tested and applied yet.

The ability of judges to make new laws in a common law system means that any issues arising from rapidly evolving financial markets can be dealt with more efficiently. And there is also research showing that common law countries tend to be more responsive to investors’ interests. Hence, in Hong Kong’s new pitch book to the global financial industry, it emphasises the city’s “common law system familiar to international investors”.

Research shows that a robust legal system is of paramount importance to financial development. It makes investors feel more comfortable and thereby expands the size of financial markets.

In our research, we’ve found that Hong Kong’s economic success since the 1997 handover can be attributed to the “one country, two systems” principle. We argue this is due to its common law system and because Hong Kong has been able to maintain an independent set of company and financial laws from the ones in China.


How Hyderabad transformed into a modern city post the outbreak of plague in early 20th century

July 7, 2020

There are fair bit of articles on how Mumbai (and other cities) transformed post the plague of 1890s.

My promising student Aasha Eapen (who writes a blog as well) points me to this article on Hyderabad fortunes turning post the plague in 1911.


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