With 5% of the world’s population and 25% of its prisoners, the United States is the most punitive country in the world. Among developed countries, the disparities are even more striking: The U.S. relies on incarceration for 70% of criminal sanctions, while in Germany, it’s 6%.

Why is the U.S. system so harsh?

A new paper by Asst. Prof. Conrad Miller and Benjamin Feigenberg of the University of Illinois at Chicago reveals how diversity, often celebrated as one of America’s foundational assets, might also help explain the harshness of its criminal justice system. The paper also offers new insight on the system’s disparate impact on African Americans, who are incarcerated at six times the rate of whites and face longer sentences for similar crimes.

Punishment varies widely between counties

The researchers split their investigation into two steps, looking first at whether punishments differ between counties. They collected county-level data over several years on every criminal arrest in four states—Alabama, Texas, Virginia, and North Carolina. Did the arrest lead to charges? Did the charges lead to formal sentencing? Did the sentence involve jail or prison time? Even when controlling for factors like age, race, and criminal record, they found dramatic variation in how different counties punish the same crime.

“People arrested in the top 25% of counties that are most punitive are two- to four-times as likely to be sentenced to jail or prison than someone who has committed the same offense in one of the most lenient counties,” says Miller, a labor economist and research fellow at the National Bureau of Economic Research whose research focuses on hiring and discrimination. “There is this huge difference in outcomes, even in the same state, with the same laws on the books.”

Diverse counties more punitive

Next, the researchers investigated a potential explanation for this variation. Prior research shows more diverse locales tend to be relatively miserly with social benefits. The underlying theory suggests that people in racially homogenous places are more willing to pay taxes into social welfare because the beneficiaries are likely to look like them, to be a part of their “in-group.” Perhaps individual preferences around punishment reflect the same bias, they theorized, and punishment is lighter in counties where prospective defendants are likely to be of the same race.

This is precisely what they found. Arrests in jurisdictions that were predominantly white or predominantly black were least likely to result in a jail or prison sentence. The severity of punishments climbed as counties grew more diverse and peaked in jurisdictions roughly that were about 30% black. (Though Miller and Feigenberg looked primarily at black-white racial divides, they noted that some Texas counties with large Latino majorities were among the most lenient.)

Reflection of voter preferences

In theory, at least, this presents a simple fix. “Our results suggest that if all jurisdictions within these four states adopted the policies of the most homogenous jurisdictions, then overall confinement rates would decline by about 15%,” Miller says — a significant figure considering the four states they study comprise roughly 20% of all prisoners confined by states. But how, practically, to make this happen is complicated.

In Miller’s view, the fact that racially diverse counties tend to be most punitive is likely a reflection of voter preferences, for which there is no policy fix. County residents vote prosecutors and judges into office, and these office-holders, in turn, strive to represent the will of their constituents. In racially diverse counties, that means prosecutors push for harsher charges—felony rather than misdemeanor, for example—and judges impose stiffer sentences—prison rather than probation or community service.

No simple fix

These findings also complicate efforts to reduce racial disparities in the U.S. criminal justice system. It would seem that, at least within the states Miller studied, these disparities are in part a result of how populations are distributed. It is more common for large populations of whites to live in overwhelmingly white counties, thereby exposing criminal defendants to relatively lenient systems. Large populations of blacks, on the other hand, tend to live in more racially diverse areas, like Houston, which ends up exposing them to more severe sanctions. In this way, racially unequal punishment is embedded in the geographic spread of populations.

One potential solution, Miller says, is to loosen the bond between voters and prosecutors and judges. That local courts are so tied to local preferences is a peculiar feature of the U.S. criminal justice system, and one that could be changed. Other countries provide models. Still, Miller couldn’t avoid a bit of pessimism when dwelling on the practical takeaway of the work.

“Perhaps there is some kind of broad kumbaya story: If we all had the right interactions at the right point in our lives we wouldn’t think about ‘in groups’ and ‘out groups’ in this particular way,” he says. “But, given the overall results, it’s not clear what the narrow solution to this problem is.”

The paper, “Racial Divisions and Criminal Justice: Evidence from Southern State Courts,” has been conditionally accepted to American Economic Journal: Economic Policy.

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It’s the 10-year anniversary of the Berkeley Haas Defining Leadership Principles: Question the Status Quo, Confidence Without Attitude, Students Always and Beyond Yourself, and Dean Ann Harrison is reflecting on their continued success.

“These principles codify so much of what sets Haas apart,” says Harrison, as she looks out her window at the four principles etched into the building above the entrance to the school. “They’ve grown stronger over the years and are now woven into everything that we do.”

Spearheaded a decade ago by former dean Rich Lyons, the principles put into words the culture that had always been a part of the school. A 2018 Poets & Quants article “Where Culture Really Matters,” noted that the principles have since become a significant symbol of what the school believes and stands for, and that “There is no doubt that Haas stands alone among business schools in consciously defining and shaping a strong culture to its competitive advantage.”

Today, the principles influence everything from how students are selected and staff and faculty are hired, to how the Haas leadership team works together, to how the budget is crafted. Harrison does not miss an opportunity to speak of why the principles are a key reason why she came to Haas. She’ll be celebrating them at events throughout the year.

“So much more than just words”

Harrison says her role as dean relates most to the principle Beyond Yourself.  “One of the great aspects of being dean is that it gives me the opportunity to give back to an incredible institution that changes so many student lives for the better,” she says.

For Senior Assistant Dean, Chief Strategy and Operating Officer Courtney Chandler, the principles have become “so much more than just words.” They’re aligned tightly to the school’s strategy and execution.

“Powerful leaders think about culture all the time,” she says. “If done well, everything relates back to the culture, from how we set priorities to how we get buy-in from people to how we show up as a community.”

Chandler says the principles impact how she personally leads at Haas, and play an integral role in how the administration responds to big challenges—such as the drop in African American student enrollment in the MBA program two years ago. “Even with a major initiative like diversity, equity and inclusion, we looked at it through our culture lens,” she says. “Our DLPs helped us to question the status quo and work through this challenge with our community using a student always mindset in a way that we never could have done as well without them.”

Developing leaders

Delphine Sherman, the school’s chief financial officer, cites numerous examples of how the principles guide her in her job. For example, she says that when filling open positions, her department always questions the status quo to find the best possible solution. “Rather than just automatically refilling that role, we ask if there is some way to change the way that work is done,” Sherman says.

Students have also become enthusiastic champions of the principles, which are increasingly embedded in Haas classrooms. Seventy-five percent of students from all three MBA programs and the undergraduate program now cite the DLPs as a strong reason for choosing Haas.

Several years ago, the school began a mapping project to “link and label” ways that core and elective MBA courses connect to the principles, says Jay Stowsky, senior assistant dean for instruction.

For example, in the Haas@Work course, students learned to “influence without authority,” which embodies Confidence Without Attitude. A Brand Strategy Boot Camp taught students to evaluate qualitative and quantitative research and turn that into actionable decisions, which reflects Students Always.

Building a community around culture

On the faculty side, Profs. Jenny Chatman and Sameer Srivistava are making the school an epicenter for culture research through the Berkeley Haas Culture Initiative and an annual conference in January. Their goal is to build a community of academics and practitioners to pioneer new research methods, spark research collaborations, and develop new tools for managing culture as a strategic asset. Chatman has also written two culture cases on the school’s culture and the history of the principles with Lyons.

The first case, which documents the culture’s origin story, is used in many ways to continue to build the culture, including teaching it in Haas classes and providing it to campus recruiters. The case is also used during faculty onboarding. “Tenure-track faculty—especially those who join Haas right after graduating from their PhD program—typically have never been part of an organization that is intentional about culture, so this material is particularly eye-opening for them,” Chatman wrote in the case.

The second case, published last year, asked what the new dean and the school need to do to keep the culture strong and valuable. Among many efforts, Chatman pointed to the Culture Leadership Fund. “Not only did the fund spark many conversations with important constituents, it also surpassed its target, raising just over $230,000 to be used for additional, culture-strengthening,” she says.

“Just getting started”

Many alumni share how the principles have influenced both their work and personal lives over the past 10 years, says Tenny Frost, executive director of development & alumni relations. School surveys have found that more than 90% of alums from the past decade are familiar with the principles and frequently cite them.

“The principles have been incredibly powerful and energizing to our alumni as they feel them deeply,” she says, noting that Haas’ lifelong learning opportunities (offered both online and in-person) support the Student Always principle.

Alumni are also honored for embodying the principles. An example is Constance Moore, MBA 80, a distinguished real estate veteran and volunteer board member for numerous organizations, who recently received a Lifetime Achievement Award.

The award recognizes members of the Berkeley Haas community who embody Haas’ Defining Leadership Principles and who have made a significant impact in their field and through their professional accomplishments. Moore is the eighth person to be given a Lifetime Achievement Award from Haas, and its second female recipient.

Lyons, who is now UC Berkeley’s chief innovation & entrepreneurship officer, says he’s thrilled to mark the 10-year anniversary, but believes that Haas is just getting started. “Ten years is a long time for an organizational change, but it is a drop in the bucket in terms of institutional identity,” he says. “Institutions that are the most intentional about culture evolve over 30, 40, or 50 years, which is what I’d like to see for Haas.”

The post Celebrating the first decade of the Defining Leadership Principles appeared first on Haas News | Berkeley Haas.

Note: Haas News is following two of this year’s 25 teams participating in LAUNCH, an accelerator for UC startup founders that has helped create more than 200 companies since 1999. They are gearing up for Demo Day in April, when they’ll pitch their ideas to VCs and angel investors and compete for $25,000 in funding. 

The two teams are pitching startup ideas that are worlds apart: one is trialing dog food made from—wait for it—insects, while the other is coding software that will power advertising displays used by ride-sharing vehicles.

What do both teams have in common? Big plans to scale their ventures.

At LAUNCH boot camp at the end of January, all 25 teams were assigned mentors. Here’s more on the startups.

SuperPetFoods

SuperPetFoods founders: The all-woman startup team includes María del Mar Londoño, MBA 21, Thais Esteves, MBA 21, a former veteran BCG consultant in banking and impact investment, and Gina Myers, MS 20 (bioengineering), a chef who trained at the Culinary Institute of America who is is passionate about sustainability. She is in charge of product development. “When Gina mentioned she had done nine Ironman races I immediately knew she was up for the challenge,” says María, who goes by Mar. “On the other side, there’s Thais, whose solid finance background has been critical to quantify the scalability of our idea. She’s also a fabulous sounding-board.”

The story: Mar grew up on a farm in the verdant, biodiverse coffee-growing region of Colombia, surrounded by more than 15 dogs. Her family was in the animal feed business, using non-conventional raw materials, so it’s no surprise that Mar is continuing that quest to find alternative, more sustainable ways to feed pets.

The “aha moment”: When Mar’s cousin started producing black soldier flies (Hermetia Illucens) on the Colombian farm and introduced her to the insect, she became intrigued by the idea of making it the basis for pet food. “It is a truly remarkable insect, capable of converting food waste into high-quality protein and fat with incredible efficiency, with an undetectable carbon footprint,” she says. Used to feed both poultry and fish, she saw an opportunity to use the larvae in dog food because it’s nutritious, digestible, and has a nutty, smokey taste. “These insects hold the massive potential to reimagine the food system,” she says.

Previous accolades and upcoming competitions: Winner at UC Berkeley’s StEP Demo Day, where she met her co-founders. In the upcoming months, they will be participating in two competitions where they are finalists: The Hult Prize Regional Competition and the 2020 Rabobank-MIT Food and Agribusiness Innovation Prize.

What they’re up to at LAUNCH: SuperPetFoods is in very early-stage work on the product, Mar says. “We need to work on product development and packaging and the overall execution of our idea—and do that in tandem with getting customer insights, and learning the most important problems that pet owners face,” she says.

Most enthusiastic test subject: Gina’s German Shepherd, Qora, is a key member of the team as QA controller, in charge of tasting. Qora has already erased one of the team’s first fears: that the food wouldn’t taste good. In the first trial, they loaded the food with sweet potato and peanut butter. But it turned out that they didn’t need all that filler. Qora gobbled it up without it.

Team mentor: Urban farmer John Matthesen, an adjunct professor in culinary arts, who teaches a farm-to-table cooking lab at Diablo Valley College. John is general manager at Biome Makers, a company that’s using the latest technology to test agricultural soil health.

Biggest challenge: Marketing dog food made with insects in the U.S. “The first time Mar told me about the flies I saw huge potential,” Thais says. “It’s about changing the minds of people. Dogs are not that picky and this is better for the environment.”

BumpR

BumpR founders: Armaan Goel, Aishwarya (Ash) Mahesh, Shreya Shekhar, all M.E.T. 23 (Management, Entrepreneurship & Technology) students, Justin Quan, BS 23 (Electrical Engineering & Computer Science).

Origin of the idea: In high school, Ash developed an idea for YAPnGO, a digital bumper sticker. When she got to Berkeley, she discussed the idea with fellow undergrads Armaan, Justin, and Shreya, and they realized that the technology could be used as an advertising display for ridesharing vehicles. They entered BumpR in the AccelerateHer immersive startup weekend at Haas and that led to LAUNCH. Bumpr is building a cloud-based, back end for advertising displays that intelligently targets advertisements to strategic consumer demographics.

Why they applied to LAUNCH: To learn about startup creation outside of the traditional classroom. “It’s one of the main things that brought me to Cal and how I wanted to spend my next four years,” Justin says. “There’s so much raw passion for entrepreneurship among students here and it’s a privilege to be a part of it.”

Accolades: AccelerateHer winner, Trione grant recipient, SkyDeck Hotdesk team, and 1st place at Entrepreneurs@Berkeley Pitch Competition.

Where they’re at now: The team already pivoted from focusing on hardware to developing software for physical advertising. “Pivots are a healthy indicator that teams are actively testing their hypotheses to get to the ground truth,” says their LAUNCH instructor Rhonda Shrader, executive director of the Berkeley Haas Entrepreneurship Program. “Sometimes that leads to a scalable business model, sometimes it doesn’t. We celebrate either outcome as a “win” for learning and a solid outcome for LAUNCH.”

Armaan and Ash are now working through the business model to see if it makes sense. Justin and Shreya are looking at industry competitors and working on the technology’s implementation.

Biggest challenge:  Dealing with the technology used in outdoor digital advertising, which is extremely outdated. Also, advertising monopolies make it a difficult industry to break into, Shreya says.

Do they think their team will win at Demo Day? Armaan says that LAUNCH isn’t about winning. “It’s about making the most out of the opportunity and being challenged by the program,” he says. “No matter what happens we’ll come out of it a better team.”

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For Dalayna Jackson, MBA 21 and co-president of the Black Business Student Association, hosting a crowded consumption function in the Haas courtyard during Black History Month was about more than dancing The Electric Slide and devouring homemade soul food.

For Jackson, last Friday was about creating a presence and assuring incoming and enrolled Black students that there’s a supportive and professional network to help them during their time at Haas.

“It’s important for us to be visible on campus for other Black students,” Jackson said. “We’re making sure that there is a space here for you and that you know about it.”

Mission to uplift, empower

A Kentucky native from Bowling Green, Jackson says she has always been a part of communities rooted in blackness, whether at her church or at social gatherings in her neighborhood.

So it’s no surprise that she’s helping to lead the BBSA, which has a mission to uplift and empower Black students on campus by building relationships with current and prospective students and alumni, connecting with Black graduate students at Berkeley and business schools in the Bay Area, and organizing social and professional networking events for its members.

During Black History Month, the BBSA will be hosting a variety of Bay Area events and outings, including a visit to San Francisco’s de Young Museum for the Soul of a Nation exhibit, a game night, a mixer with Stanford’s Black Business Student Association, and a luncheon for Black staff and faculty.

Part of Jackson’s mission is to continue to strengthen the Black community on campus. In the 2018 entering full-time MBA class, African Americans represented only two percent of the class, or six out of 291 students. This year, that number of incoming students tripled.

“I knew I wanted to be involved in BBSA because I wanted to help create a sense of community for my class and for those second-years who didn’t have that community,” Jackson said. “I want to make sure that moving forward, students always have a place where it feels like home.”

Building meaningful relationships

Nicole Austin-Thomas, MBA 21, said she, too, felt compelled to join BBSA to build a support network for current and future students and alumni. As BBSA vice president, not only is she helping organize retreats, study sessions, and mixers to foster connections among members, but she’s also benefiting from her efforts, too.

“I know there are 20 people on campus who I can reach out to for anything that I need and I’m willing to give my time and support to them as well,” she said. “BBSA allows me to have meaningful relationships that will carry beyond my time at Haas.”

While the first-year MBA class has many more African American students, and the school adopted a comprehensive Diversity, Equity, and Action plan (DEI) in October 2018 that aims further increase representation, both Jackson and Austin-Thomas say there’s still work to do.

“I want students to know that there are people on campus who want to support you and want to see you succeed, but there’s no stasis,” Austin-Thomas said. “By coming here, you’ll be helping us build.”

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The global trade in enslaved people is directly linked to distrust in Africa’s financial system.

Nearly two-thirds of Africa is “unbanked” and has no relationship with a financial institution—one of the highest rates in the world, according to the World Bank. The rapid rise of mobile money sent through smartphones is steadily boosting financial inclusion across the continent, but the lack of access to traditional banking accounts and loans is depriving millions of Africans of the ability to save and borrow money they could use to start a business or move to a neighborhood with better schools.

This poor access to financial services has a multiplier effect far beyond savings and lending, affecting everyday life including employment options, says Berkeley Haas Prof. Ross Levine. “How well the financial system operates can shape an individual’s overall socioeconomic horizon, even if that person never takes out a loan,” he says.

Many scholars have looked at the myriad reasons for the lack of financial inclusion in Africa, ranging from poverty to the effects of colonialism. In the first study of its kind, forthcoming in The Economic Journal, Levine and two coauthors have pinpointed another important factor: The devastating impact of the global slave trade that gripped Africa most intensely from 1400 to 1900.

Broken trust

When Africans were captured from their villages and sold into lives of toil in faraway countries—often by other Africans who sold enslaved people to Europeans, Arabs, and Indians—the trust of those who remained in their neighbors and in institutions fundamentally broke down. The fact that this distrust could linger so long after slavery faded was a surprise to Levine. “I would have thought that institutions, social coherence, and trust would have had plenty of time to emerge once the slave trade ended,” he says.

To measure the connection between the African slave trade and trust in financial institutions, Levine and his colleagues analyzed data about the intensity of slave trading within 51 countries as well as within 186 ethnic groups. To isolate the effect of the slave trade, the researchers controlled for a number of factors that could have influenced the results, such as a country’s legal system and how long it has been independent, as well as individual-level factors such as education, income, and age of the population.

The study showed a strong, negative correlation between the intensity of a country’s historical exposure to the slave trade and the rate that households currently own or use an account or debit card at a bank or other formal financial institutions; save money at formal financial institutions; obtain short-term loans, credit cards, or mortgages from banks; and use the internet or mobile phones to make financial transactions. They also cross-checked the country-level results with results by ethnic group, finding that ethnicities with higher rates of enslavement also had higher rates of mistrust in the financial system.

To quantify the magnitude of the effect, the researchers examined a hypothetical scenario in which one group of countries that had a relatively higher intensity of slave trading (such as Sierra Leone, Malawi, Ethiopia, and Guinea) suddenly became much more like countries that had a relatively lower intensity of slave trading (countries such as Burundi, Zimbabwe, Niger, and South Africa). In that scenario, the probability that the average person would have saved at a bank, received a bank loan, or made a transaction with a mobile money account would have increased by 50%. In a continent with a low starting point for participation in the financial system, that represents an increase in financial inclusion of millions of Africans.

Wide variation in financial participation

Along with the high-level macroeconomic impacts, the study showed considerable variation across countries in the real world:

• Credit card use in Mauritius and South Africa—where the slave trade was less intense—was greater than 16%, while it was below 0.5% in Madagascar, Sudan, and Ethiopia, where people were sold into slavery at relatively higher rates.
• In Mauritius, where the slave trade was negligible, only 0.3% of the respondents indicated a lack of trust in banks. In Niger, which experienced a low-level slave trade, 22% of the respondents said they did not trust banks or other formal financial institutions.
• More than 16% of those surveyed had received a loan in the last year in Botswana and Mauritius, which largely escaped the slave trade, while less than 2.5% of survey respondents received a loan in the last year in Guinea, which had a much more intense slave trade. However, loan rates did not match the intensity of slave trading in several other countries (Niger had far lower loan rates than Uganda, though slave trading rates were similar).

All this data shows something else beyond the numbers. “Factors that influence culture have a very long-run, enduring effect on communities,” says Levine. “Culture exerts a first-order impact on many of the economic outcomes that people care about.”

That insight offers some hard lessons for financial services businesses and policymakers, since trust is vital for finance to work, says Levine. Putting your money in a bank involves a certain trust that the legal system and the government are going to properly safeguard your money. Similarly, financial institutions must be able to trust that a loan recipient will pay them back. Without trust, the cost of enforcing every single contract would become overwhelming and reduce the overall availability of credit, and therefore limit economic growth and opportunity.

“Establishing trust is important for financial services companies everywhere, but it is much more difficult to create that trust in countries that had a more brutal experience with slavery.”

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A new technology to help companies assess climate change risk and a financial tool to help insurance companies invest in the best portfolios netted first-place wins for two Berkeley Master of Financial Engineering students participating in a competition at Moody’s Analytics. 

Yashoraj Tyagi and Akshay Gupta, both MFE 20, each took home $500 and received awards for helping to design new financial tools while interning at Moody’s Analytics this past winter.

“It’s rare for an intern to win, especially when you’re competing against actual Moody employees,” said Tyagi. “It feels good to win.”

Using Natural Language Processing (NLP), an artificial intelligence that helps computers and people communicate with each other, Tyagi helped design a new technology that aggregates information about a company, including annual filings, news articles, and climate disclosures, and evaluates a company’s risk to climate change. Investors could use the evaluation to determine whether a company is a safe or risky investment bet.

Gupta helped design a financial tool that assesses the risk level and expected returns of investment portfolios by analyzing millions of data points, including GDP, stock performance, and current events. This new tool would help insurance companies optimize their financial investments, especially when faced with economic challenges such as low interest rates and increased demands for improved credit modeling.

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This is the first in a series of articles we’ll be writing throughout the year to mark the 10th anniversary of the Haas Defining Leadership Principles by showcasing community members who embody our culture.

When Sean Li, EWMBA 20, asks Haas students to come on his podcast, there’s usually some hesitation. 

“Many people tell me, ‘I don’t think that I’m that interesting,’” he said. “But trust me, everybody has a story.”

And he’s right. Tune into Li’s OneHaas podcast and you’ll hear from a U.S. kickboxing champ, a former Marine turned sommelier, and an entrepreneur who created caffeinated gum.

Produced by Li and Raymond Guan, EWMBA 22, OneHaas takes about 25 minutes to tell stories of current students to foster community among all MBAs on campus. Since launching in March 2018, Li has interviewed more than 50 students, and many people are listening. OneHaas has been downloaded more than 7,300 times in more than 50 countries.  

With so many people tuning in, Li tries to interview a diverse mix of students from all degree programs and backgrounds. One interviewee, Dana Zhang, EWMBA 21, said the podcast has helped her to get to know fellow classmates. 

“As evening and weekend students, we don’t have the luxury to spend as much time as we’d like on campus to get to know each other, so the OneHaas podcast has been a useful forum for me personally to get to hear from my classmates,” she said.

Not only are current students tuning into OneHaas, but so are prospective students, which is part of the reason why Li created it. 

“I’ve had at least 20 prospective students reach out to me,” Li said. “They’ll write and say, ‘You know, this one episode that I heard really convinced me to come to Haas. Thank you.’ That really moved me.” 

Creating the podcast wasn’t difficult for Li. He’d produced DIY videos for two automotive e-commerce businesses that he co-founded prior to coming to Haas. 

Asking the right questions and convincing students to share their stories were the hard parts. 

“In the beginning, it was like pulling teeth to get someone on,” he said. “But once I produced the first five episodes, people started to realize that I was serious and that the podcast sounded pretty professional.” 

Now that OneHaas is gaining traction and helping to strengthen ties among students, Li is receiving more support from campus leaders. 

This past fall, Li received $1,000 from the Evening & Weekend MBA Association, the student body government association, and a $5,000 grant from the Berkeley Haas Culture Fund for audio equipment.   

Li will graduate this May, but he plans to support the continuation of the podcast long after he’s gone. 

“I feel so privileged to have had this platform to interview all these amazing students and hear their stories. I hope more students will join the team and help carry the torch.”

The post OneHaas: a podcast for students by students appeared first on Haas News | Berkeley Haas.

Former Fed Economist and Prof. James Wilcox is a longtime observer of federal fiscal policy, monetary policy, and the economy. A professor of finance and economic analysis and policy, Wilcox served as a senior economist on the President’s Council of Economic Advisors from 1990 to 1991, as an economist with the Federal Reserve from 1991 to 1992, and as chief economist for the Office of the Comptroller of the Currency from 1999 to 2001. His research focuses on small business lending, banking, and consumer spending.

Wilcox shared his perspective on the week’s stock market whiplash—the largest single-day market drop since 1987 on Thursday followed by a rally on Friday—as well as what the Fed and the government can do to cushion the widening economic crisis caused by the coronavirus pandemic.  

President Trump on Friday declared a national emergency that will free up $50 billion in aid, and stocks mostly bounced back from Thursday’s crash. Will the national emergency status help economically?

The emergency declaration allows for some helpful actions right away. Much more will need to be done. The declaration was also valuable if it signals that the Administration will be doing much more than it has so far. We have a serious problem. It calls for large, rapid responses. 

The Administration can help by using fiscal policies now. Speed counts. The old saying that ‘a stitch in time saves nine’ holds for financial markets, businesses, and households if they have their operations or cash flows disrupted. Getting more help sooner to those who are more impacted can avoid more pain for them and can avoid taxpayers’ paying more to help more later. 

The sooner the government acts, the better—and the cheaper—it will be for all of us.

The House passed a coronavirus emergency relief bill Friday night that includes two weeks of paid sick leave for some workers and up to three months of paid family and medical leave, $1 billion in grants to states to help pay unemployment insurance, and some food assistance. The Senate will take it up this week. What kind of policies do you think are most needed right now?

We want to get the most immediate help to those facing the most pressing pains. If supplies and demands contract as much as now seems likely, there will be real cash crunches for some big and small businesses, for higher-income households and lower-income households. Some businesses will have serious shortages of customers, and perhaps of materials and parts as well. Some households will have their hours or jobs cut. They may face serious cash, or liquidity, shortfalls—they may become “ill-liquid.” Policies should be adopted now that will be ready and able to provide financial triage. When illiquidity turns into insolvency, it causes many more problems. The sooner they can get help, the less they will need—’a stitch in time.’ 

One policy that could greatly help is government loan guarantees. The law passed about two weeks ago authorizes about $50 billion more SBA-guaranteed loans to small businesses harmed by the virus crisis. And some much larger companies may warrant help too. Most visibly being hammered by the corona crisis are airlines, hotels, and, of course, cruise companies. They won’t be the only ones. This emergency may well call for a program akin to a Large Business Administration that can quickly provide funds for large businesses. 

These policies can be really valuable to businesses and households. They can also benefit the nation. Nonetheless, they do impose costs and risks on taxpayers. Hard-headed, helpful policies need not be give-aways like tax breaks. For example, a payroll tax cut—which has been discussed—is aimed at entirely the wrong group of people. To be paying payroll taxes you need to be working. It is the businesses that are hurt by this crisis and cannot afford to keep employees that we should aim at. We want to help the workers who have lost hours or jobs, and the businesses that are in danger of going under. 

 Policies funded by taxpayers can be more like investments. In the 2008 financial crisis, taxpayers got too little in return for the enormous costs and risks their government took on their behalf. 

It’s not inevitable, but a recession now appears pretty likely for the U.S. economy.

Last week you commented that “darkening clouds have now come over the economy.” Is a recession inevitable at this point?

It’s not inevitable, but a recession now appears pretty likely for the U.S. economy. The more nations that impose widespread restrictions like lockdowns, the more likely that we have a global recession.

With appropriate policies, a recession in the U.S. could be shorter and shallower than usual. A lot depends on how the virus situation is handled and proceeds. At this point, forecasting the economy requires a guess about how effectively medical tests get distributed and used, how well our medical system can handle the volume of patients requiring some or a lot of care, and so on. I really don’t know much about the severity or probabilities of the various virus scenarios. Even forecasting what policies will get enacted is problematic.

But, anyone’s forecast for the economy will have to change if we keep getting surprises, good or bad, about the policies and management of the corona crisis. The larger and the sooner our fiscal response, the less likely that we have a recession this year or next. The early performance on health and economic policies has not been good, but they both show signs of improving.

Why do you say a recession could be shallower and shorter this time (with that big if)?

It is our good luck that the virus arrived here when our economy is on very solid footing. There have been few serious excesses, imbalances, or problems. Growth has been steady and unemployment low. We haven’t had a recession in over a decade. If the economy were ever going to withstand a shock, this is one of the better times. The job market has been very strong. Households’ finances have improved greatly. Housing has been strong. The same applies to businesses. After-tax profits have been very strong for a very long time. Even state and local government budgets have been in good shape lately. And, the financial system is really solid. Unlike the 2008 financial crisis, when problems erupted in—and were made worse by—financial institutions, this time around, the financial sector is in very solid shape. It’s strong enough to cushion some of the jolt to households and businesses. In the previous crisis, instead of being shock absorbers, financial institutions did the shocking. 

Unlike the 2008 financial crisis, when problems erupted in—and were made worse by—financial institutions, this time around, the financial sector is in very solid shape.

Yet last week, stocks were crashing, and bond yields weren’t rising as they usually do. That led some to say the system is more fragile than it appears. What was going on?

The size and suddenness of the recent stock market declines built up some frictions in financial markets, especially in credit markets. That’s why the Federal Reserve was right to pledge an essentially unlimited availability of cash for financial markets to borrow. The Fed has also jumped in to buy lots of longer-term Treasurys when it appeared that even those bonds were suffering from illiquidity. These two operations have both lubricated the frictions in credit markets and signaled that it’s ready to act quickly and decisively if need be. The result is that borrowing rates will be lower than if the Fed had not acted.

The Fed is expected to drop interest rates to zero. How much will interest rate cuts help stem the crisis?

The Fed cut interest rates by half a percent just a short time ago. And, now there is a very good chance that it will just cut short-term rates to zero. Every little bit helps. And longer-term rates are now much lower than they were over the past year. Mortgage rates are down by a full percentage point. And that has already touched off a refinancing boom that will leave homeowners with more to spend elsewhere. The lower rates may also draw in more home buyers, too. 

The Fed has done what it should do, which is lubricate and reassure financial markets, and the rest of us. But there are real limits to what it can do. In this situation, lower interest rates will not be the solution for workers who lose hours or jobs, or for businesses that lose customers. Making funds available to those who are cash-strapped will be. Whether assistance comes via paid sick leave, unemployment checks, government-guaranteed loans, or some other form is the province of fiscal policy. The sooner the government acts, the better—and the cheaper—it will be for all of us.

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In the midst of challenging times, the Berkeley Haas community stepped up for Big Give: The annual 24-hour campus-wide online fundraising blitz brought in more than $5.5 million in donations to the school this year.

“Philanthropy is a big part of our school’s ability to react during this crisis, and donor support is more important than ever,” said Tracy Mills, executive director of Berkeley Haas Development and Alumni Relations. “Big Give is a wonderful way for us all to come together and demonstrate our collective strength, resilience and compassion. We know there are so many other things top-of-mind for people right now, and we are grateful that hundreds of faculty, staff, students, and alumni chose to give back to Haas during the Big Give.”

The school’s March 11 Big Give successes include:

• topping the leaderboard with $5,574,169 raised. For the second year in a row, Haas was the top fundraising department on campus.
• raising 598 gifts in a single day and securing $160,500 with two challenge matches.
• winning the campus prizes for the most gifts to one fund, and securing the most gifts from young alumni.

Big Give launched in 2014 to give the entire Berkeley community—alumni, parents, students, faculty, staff, and friends—the chance to come together to support favorite schools and programs, and to help those schools and programs win prize money. This year’s event raised $10,130,341 from 12,538 gifts campus-wide.

If you missed the Big Give, it’s still possible to donate.

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Jason Li, BS 20, was at brunch with friends earlier this month chatting about the impact of the coronavirus when an idea popped into his head.

“I realized that the coronavirus was getting worse, and that people should be informed of the figures so that they can properly assess their risks,” said Li, a senior who is a double major in business and computer science. “But without data, they can’t do anything.”

That idea led Li and his team to work two straight days and nights toward the launch of LiveCoronaUpdates.org, taking it only March 3. The website aggregates data on coronavirus cases from the WHO, local governments, and major American news outlets. So far, the website has had more than 210,000 page views.

Li and his team, which includes code-savvy interns and engineers who work at his chat-and-payment startup, LoopChat—currently housed at  Berkeley SkyDeck—update the figures every three to four hours.

Li, a budding entrepreneur, says he aims to provide accurate, easy-to-understand information about the virus, including the number of deaths, confirmed cases, people who have recovered and active cases in specific geographical areas. The goal is to get the data to the largest audience possible and to help calm anxiety with facts people can rely on as they navigate the new normal of their daily lives.

CoronApp Team races to develop mobile app

Li isn’t the only student on campus to jump into action on a coronavirus tracker. Anupam Tiwari and Anushka Purohit, both electrical engineering and computer science (EECS) majors and exchange students at UC Berkeley, started working on CoronApp together. The pair recently added first-year MBA students Akonkwa Mubagwa and Manuel Smith to their team.

The group connected at a recent coffee meetup for entrepreneurs in the Haas courtyard.

“The idea (for CoronApp) was great, but the form and user experience wasn’t there yet,” Mubagwa said of the design Tiwari showed him. “It was impressive that he set it up so fast, and we knew it would be useful.”

The students joined forces and later added coder Sahil Mehta, an EECS undergraduate; Ean Hall, MS 20 (mechanical engineering) who specializes in quantitative analysis; and Daniel Smith, a software developer. Sevith Rao and Andy Cheng, both medical doctors and first-year MBA students at Berkeley Haas, agreed to serve as CoronApp advisers.

CoronApp for mobile browsers, now available, allows users to click on red dots on a map to provide updates on virus cases. It integrates COVID-19 data from Johns Hopkins University, the Centers for Disease Control and the World Health Organization (WHO), and a Twitter feed provides the latest curated news.

Tiwari first tested CoronApp on his roommates, who rated it a seven out of 10. Their feedback helped him improve how fast the app loads—and to decide to add a Twitter feed and information on the right way to wash your hands and wear a face mask. The team had planned to offer the app for iPhones, but Apple is currently only accepting apps “from recognized entities such as government organizations, health-focused NGOs, companies deeply credentialed in health issues, and medical or educational institutions.”

Once they have perfected the app, the team believes it will become a scalable platform for crowdsourcing during future emergencies — from disease outbreaks to wildfires.

Mubagwa said that the way that the team came together to form CoronApp is a perfect example of why he came to Berkeley.

“Excellence across schools—engineering, business, and public health—allows for spontaneous cross-pollination,” he said. “We are all very different and from different backgrounds, but we are tied together by entrepreneurship. That’s what makes Berkeley so special.”

Li, who has been working to get word of his website across campus, said it’s rewarding to build a product that so many people find useful. “A lot of people have been emailing me saying how much they appreciate it,” he said. “I like building stuff that helps people. That’s what entrepreneurship is about: making a positive impact.”

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When Lauren Grimanis ran a rural education organization in a remote community in Ghana with no running water or electricity, she turned to yoga and meditation to handle the stresses of daily life.

“While I had community around me, I still felt socially isolated,” said Grimanis, MBA 20, who founded the nonprofit Akaa Project in 2008. “I had to climb a hill into a tomato farm behind my house to get cell service so it was difficult to connect with friends and family.”

Grimanis had no idea that what she’d learned about the value of mindfulness in Africa might prove a handy tool for both helping herself and her tight-knit MBA class cope with the isolation and frustrations of social distancing under the COVID-19 outbreak. As head of the Haas Mindfulness Club, Grimanis not only exercises online with her MBA friends; she’s also put together a Google doc listing everything from free meditation apps to CorePower Yoga classes and shared the doc with both FTMBA classes.

“Last week people were feeling really frustrated and anxious, both understandable feelings. I wanted to help, so we jumped into action,” she said. “We really want to get people to think more positively and use mindfulness in their new daily routines.”

Cheering each other up

Under COVID-19 restrictions, student life has continued online. Joey Parker, MBA 21, organized a toast on Zoom at 9 pm on St. Patrick’s Day for all MBA students. Chris Lee, MBA 20, celebrated his recent 30th birthday online, surrounded by about 50 of his MBA friends. The new reality won’t replace the in-person courtyard lunches, cohort parties, or Tahoe weekends, students say, but they’re working hard to use tech to keep their communities together and stay focused on their work.

The same rings true for evening and weekend students. Terrell Baptiste, EWMBA 20, said his classmates are phoning each other and tapping into the class’ WhatsApp chat group to keep in touch. About 40 classmates are using the app to cheer each other up or initiate discussions about the pros and cons of a shelter-in-place order and whether a stimulus package would help stabilize the U.S. economy. 

Haas undergraduates, too, are finding ways to stay virtually connected.

Shun Lei Sin, BS 20, uses Zoom and has joined a Slack channel called SF Entourage, a private virtual community, where she can participate in cooking competitions, play games online or start a book club with friends. Zaheer Ebtikar, BS 20, uses Slack, Instagram, and Twitter to connect with friends while he finishes the semester at home. Neha Dubey, BS 21, sends Google hangout links to classmates, inviting them to virtual lunches. She’s also tapping into Berkeley’s Student Environmental Resource Center (SERC) to stay in touch with friends.

“One of my friends is the community engagement associate for SERC and she’s hosting virtual study sessions every Tuesday and organizing baking classes and Netflix parties. It’s just another way to have that human interaction,” Dubey said. 

Despite not being able to see her friends in person, Dubey said life under COVID-19 has brought her friends closer together.

“All of my friends have really bonded through this. We’re all making an effort to be a larger part of our everyday lives,” said Dubey. “It’s a lot less texting and a lot more calling.” 

Saying goodbye

For some international students in countries where borders are shutting, the decision to stay on campus or go home, depending on border and visa situations, is difficult. Before Thais Esteves, MBA 21, returned home for the summer to Brazil this week her friends threw her one last impromptu party. The party, initiated by a handful of classmates who were playing an online board game together, started after they sent a few photos to WhatsApp with a link to the virtual celebration. A bunch more classmates joined in to celebrate Esteves’ birthday, and to say goodbye before she boarded the plane. They donned costumes, as they often do at MBA parties, including a polar bear, a viking hat, a unicorn, and a ship’s captain.

A sari, never worn

Many students are grappling with the possibility of  a virtual commencement. Ije Durga, MBA 20, said she understands why commencement can’t be held in-person, but is hurt that she won’t be able to say goodbye to her friends in person. Durga, who practiced law in India before coming to Haas, is also disappointed that she won’t be wearing a special sari she’d picked out for the ceremony and ordered from India.  “I was looking forward to putting that on and surprising everyone—an African woman in a sari,” she said. She said the friend who was going to bring it to her can’t even travel to the U.S. now. “The world has changed so much in just two weeks,” she added.

April staycation

For many students, spring break meant canceling planned trips, and treks, and suddenly wondering what to do with all that time off. On Thursday, Ana Christina Alanis, MBA 21 and the class’ VP of social, was canceling a web of spring break flights to Colombia. She’d planned to visit Medellin and then scuba dive in Cartagena with a group of 12 students, including her roommate. She was looking forward to relaxing for nine days and a break from her job search. “Spring break starts tomorrow and I have absolutely nothing to do,” she said. The upside? She might teach an online cooking class to Haasies—and she might be able to reschedule her trip with her Colombian classmates, who couldn’t go with her this time. 

Get your Zumba on!

After in-person classes stopped, the FTMBA Association and Alex D’Agostino and Annie Powers, both MBA 20, got together and worked on a spreadsheet of classes that could be taught by students for students. Lipika Grover, MBA 20, is one of the first to go for it. She taught her first Zumba class ever on Zoom on Thursday morning. Grover, who had taken many Bollywood classes and loves to dance, was live teaching by 10 am from her home in Houston, where she returned to be with her family. 

“It will hopefully lift people’s moods and we’ll get some exercise—wherever we are,” said Grover. “Virtual is the best way to be together and to be strong now. We have to make the best of what we have and come together as a community.”  

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Asst. Prof. Ellen Evers of the Haas Marketing Group has been recognized with UC Berkeley’s premier award for graduate mentorship. 

The Carol D. Soc Distinguished Graduate Student Mentoring Award recognizes faculty for their vital role in mentoring graduate students and training future faculty. Evers received the 2020 award for early career faculty.

Evers has acted as an exceptional mentor, supporting students in their academic and personal lives and bringing the department together, wrote marketing PhD student Stephen Baum in his nomination. 

“Our weekly meetings are a treat. They are fast paced, firing-on-all-cylinders affairs, where I am pushed and challenged to grow as an independent thinker,” he wrote. “As part of this, Professor Evers meaningfully engages with me throughout every aspect of the research process, from hypothesis creation to data analysis.”

Baum said Evers has an “an extremely uncommon ability” to guide him in uncovering and identifying the promising components of his ideas. “The prospect of proposing and completing a dissertation is much less daunting with the knowledge that I will have Professor Evers guiding me.”

She has also provided warm personal support, he noted, from offering to bring medicine when he was sick to organizing card games, hikes, and other outings for the department. “She regularly goes above-and-beyond in supporting me as a student, as a collaborator, and as a human being,” Baum wrote.

Evers, who has taught at Haas since 2015, studies judgment and decision making and moral psychology. 

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A total of 93 students in the 2020 Master of Financial Engineering class graduated March 13, as commencement speaker Rachel Schutt, a BlackRock managing director, urged them to plant seeds to build the future—and embrace failure.

“The reason why I want you to think about your relationship and beliefs about failure is that it goes hand in hand with the risks you are willing to take, what success means to you, and whether you will try things even if there’s a chance that you might not succeed,” said Schutt, who is head of BlackRock’s AI labs.

Dean Ann Harrison thanked spouses, significant others, parents and friends of the graduating students who watched via livestream.

“We are facing the most challenging health and global crisis that I have personally encountered in my own lifetime,” Harrison told the graduates. “Yet I feel comforted and optimistic in the fact that you brilliant and caring Haas grads are going out in the world to fix our problems and I know you can do it.”

Watch the full video of MFE commencement.

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