Asst. Prof. at INSEAD and former MIT Sloan Lecturer Andy Yap
From WBUR Cognoscenti
Stress used to be a dirty word. Study after study has shown that stress makes workers less productive, less satisfied, less healthy — and, therefore, more likely to call in sick. For many years, the message to managers was simple: Stress causes burnout; avoid it for yourself and for those who work under you at all costs.
Nowadays, however, the message is more complex. A growing body of research indicates that some stress is good for workers. Perhaps more important, studies have found that too little stress can be bad. Stress related to boredom leads employees to engage in counterproductive work behavior, such as spending aimless time on the Internet for non-work reasons, gossiping about colleagues, and taking way too much time completing work assignments.
So: Excessive stress leads to mental exhaustion and poor health, but not enough stress results in boredom and demotivation. What’s a manager to do? The answer lies in the Goldilocks Principle. The optimal level of stress is not too much, not too little, but an amount that’s just right.
We usually think of ethnic diversity as a matter of social policy, not a factor that could impede market bubbles. But new research by me and a team of colleagues suggests a surprising new reason to consider diversity as a hedge against speculative bubbles: in two studies, we find that markets comprised of ethnically diverse traders are more accurate in pricing assets than ethnically homogeneous ones. Our paper, which came out Nov. 17 in Proceedings of the National Academy of Sciences (PNAS), finds that ethnic diversity leads all traders, whether of majority or minority ethnicity, to price more accurately and thwart bubbles. The reason isn’t because minority traders had special information or differential skills; rather, their mere presence changed how everyone approached decision-making. Traders were more apt to carefully scrutinize others’ transactions and less likely to copy others’ errors in diverse markets, and this reduced the incidence of bubbles.
To conduct our research, we constructed experimental markets in the United States and Singapore in which participants traded stocks to earn real money. We randomly assigned participants to ethnically homogenous or diverse markets. We found that markets comprised of diverse traders did a 58 percent better job at pricing assets to their true value. Overpricing was higher in homogenous markets because traders are more likely to accept speculative prices, we found. Their pricing errors were more correlated than in diverse markets. And when bubbles burst, homogenous markets crashed more severely.
Two hundred years ago (August 24, 1814), the British burned the U.S. Capitol and White House to the ground. This took place at a time of an intensely divided American government — where rancor, bitterness, and profane curses were commonplace in Congressional debates between Federalists and Republicans. Yet, these same Members of Congress stood together to turn back the British and rebuild Washington.
Polarization and intense difference hold sway today too. Shall we come together or let the house burn down?
One of the inspiring lights of that earlier era was Dolley Madison, remembered as the country’s first “first lady.” She took it upon herself to provide a context for engagement that cut through the animosity of the time. She redesigned the White House, carving out grand social spaces, to make it possible for people to meet together.
Nearly one fifth of American workers work in retail and fast food, and they have bad jobs. They earn poverty-level wages, have unpredictable schedules that make it hard to hold on to a second job, and have few opportunities for success and growth. These are not just people who are uneducated or unskilled. In 2010 more than a third of all working adults with jobs that did not pay a living wage had at least some college education or a degree.
The conventional wisdom in business is that bad jobs like this are necessary to keep prices low and profits high. If a low-cost retail chain were to pay its cashiers more, then it would either make less money or have to raise its prices. Implicit in this logic is the seemingly self-evident tradeoff between low prices and good jobs. But that is a false tradeoff. Even in highly competitive industries like low-cost retail, it is possible to pay employees decent wages and treat them well while giving customers the low prices they demand.
I studied four retail chains that manage to do this: Costco, Trader Joe’s, QuikTrip (a U.S. chain of convenience stores with gas stations), and Mercadona (Spain’s largest supermarket chain). They offer their employees much better jobs than their competitors, all the while keeping their prices low and performing well in all the ways that matter to any business. They have high productivity, great customer service, healthy growth, and excellent returns to their investors. They compete head-on with companies that spend far less on their employees, and they win.
Sports radio isn’t a typical venue for impassioned debate on work-family issues and employment policy. But recently when Daniel Murphy took three days off from his job as second baseman for the New York Mets to be with his wife as she delivered their newborn son, it became just that. Two WFAN broadcasters — Mike Francesa and Boomer Esiason — took to the airwaves to rebuke Murphy’s absence.
“Quite frankly, I would have said [to my wife that she should have a] C-section before the season starts,” Esiason said. (For the record: Major League Baseball has had a three-day paternity leave policy since 2011.) Thankfully, all that machismo subsided when fans and athletes came to Murphy’s defense.
“You know, the man had his first child. He’s allowed to be there. The rules state that he can be there, so he went,” said Terry Collins, the Mets manager.
Bravo to Murphy for exercising his employee right to take paternity leave. Well done to Collins, his boss, for encouraging him to do so. These are welcome developments, particularly in such a male-dominated arena, like sports.