One earth, two social fields – Otto Scharmer

MIT Sloan Senior Lecturer Otto Scharmer

MIT Sloan Senior Lecturer Otto Scharmer

From the Huffington Post

Dallas, Ferguson, Nice. Turkey, Trump & Brexit. The simultaneous rise of global terrorism, of authoritarian strongmen and the far-right are the twin faces of our current moment. Even though Trump-type politicians and terrorism pretend to fight each other, on a deeper level they feed off each other. The more terrorist attacks occur in the US, Turkey, France, or Germany, the greater the chances that Trump, Le Pen, and their allies will be elected. But what’s more interesting is the intertwined connection on a deeper spiritual level: both movements, to various degrees, thrive on activating a social-emotional field that is characterized by prejudice, anger, and fear.

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Here’s why negative interest rates are more dangerous than you think — Charles Kane

MIT Sloan Senior Lecturer Charles Kane

MIT Sloan Senior Lecturer Charles Kane

From Fortune

Europe and other parts of the world are in for big risks.

Desperate times call for desperate and somewhat speculative measures. The European Central Bank (ECB) cut its deposit rate last Thursday, pushing it deeper into negative territory. The move is not unprecedented. In 2009, Sweden’s Riksbank was the first central bank to utilize negative interest rates to bolster its economy, with the ECB, Danish National Bank, Swiss National Bank and, this past January, the Bank of Japan, all following suit.

The ECB’s latest move, however, was coupled with the announcement that it would also ramp its Quantitative Easing measures by increasing its monthly bond purchases to 80 billion Euros from 60 billion Euros — a highly aggressive policy shift. The fact that the ECB has adopted this approach raises two key questions: What are the risks? And, if the policy fails, what other options are left?

Negative rates are an attempt by the ECB to prod commercial banks to lend more money to businesses and consumers rather than maintain large balances with the Central Bank. In essence, it is forcing the banks to leverage its balance sheet to a higher level or the ECB will penalize the banks by charging interest on their deposits. Historically, such a practice would be highly inflationary, however, with oil prices falling to record lows combined with a slowdown in global growth, inflation is not feared. In fact, inflation is desired at a manageable level, as this would promote near-term growth in the economic markets.

This does not mean, however, that the ECB’s policy does not present risks. First, if the commercial banks decide to pass on the cost of the negative rates to their customers — in other words, they charge customers for keeping their savings in the bank in the same way central banks are now charging the commercial banks for keeping their money – the customers might simply withdraw their savings. In a worst-case scenario, this could create a run on the banks in Europe with customers hoarding their money rather than paying interest on deposits. This would inhibit the free flow of funds through the financial system — ironically, the very reason that negative interest rates were implemented in the first place.

Read the full post at Fortune.

Charles Kane is a Senior Lecturer in Technological Innovation, Entrepreneurship and Strategic Management Goup and also in the Global Economics and Management at the MIT Sloan School of Management.

Why your diversity program may be helping women but not minorities (or vice versa) – Evan Apfelbaum

MIT Sloan Asst. Prof. Evan Apfelbaum

MIT Sloan Asst. Prof. Evan Apfelbaum

From Harvard Business Review

When it comes to issues of race, gender, and diversity in organizations, researchers have revealed the problems in ever more detail. We have found a lot less to say about what does work — what organizations can do to create the conditions in which stigmatized groups can reach their potential and succeed. That’s why my collaborators — Nicole Stephens at the Kellogg School of Management and Ray Reagans at MIT Sloan — and I decided to study what organizations can do to increase traditionally stigmatized groups’ performance and persistence, and curb the disproportionately high rates at which they leave jobs. Read More »

The road to safe, secure driverless cars — Lou Shipley

MIT Sloan Lecturer Lou Shipley

MIT Sloan Lecturer Lou Shipley

From Xconomy

The development of autonomous vehicles promises a future of safe and efficient roads, unimpeded by distracted, impaired, aggressive, or deliberately speeding drivers. But to achieve this, the companies involved in developing driverless cars will have to navigate significant obstacles.

The transition from personally controlled to automated vehicles can be likened to the shift that occurred over the past 20 years from brick-and-mortar retail to e-commerce. For traditional storeowners, security depended on door locks, alarm systems, cameras, and access to cash registers. For online retailers, security has to do with networks and software.

Similarly, the safety focus in driverless vehicles will be largely about securing the networks and software that drive the cars. Today’s cars have approximately 100 million lines of code in them. Autonomous cars will have many times more. The companies that manufacture driverless cars will have to actively manage all of the security aspects of the vehicles’ software.

Today’s carmakers have, over time, developed efficient procedures for recalling and fixing vehicles with parts identified as faulty or unsafe. Similarly, with autonomous vehicles, manufacturers will need to devise methods of identifying and fixing problems discovered in software. In many cases, repairs can be done remotely, in the same way that mobile phone and computer makers can send patches over networks. But however fixes are made, management of software supply chains will need to be as efficient as the management of the supply chains for physical parts.

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Why the good people of Illinois should care about a Puerto Rico bailout — Ike Brannon and Michelle Hanlon

MIT Sloan Professor Michelle Hanlon

MIT Sloan Professor Michelle Hanlon

From Crain’s Chicago Business

It’s become increasingly clear that Congress will need to provide some sort of assistance to the bereft government of Puerto Rico. The island has been in recession for a decade and holds $72 billion in debt it cannot fully repay; its pension plan is nearly bankrupt.

While there’s widespread agreement that something must be done, there’s not as yet any unanimity as to what this something should be. How Congress resolves this issue should be watched closely by the taxpayers of Illinois, because it could end up worsening the state’s finances.

Puerto Rico arrived in its current fiscal throes by borrowing money to postpone difficult tax and spending decisions whenever possible—a strategy that everyone in Illinois would recognize. Until quite recently it could borrow at rock-bottom rates, thanks to the generous tax breaks its lenders receive on their interest at the local, state and federal level. Eventually, lenders began to fear that they might not get repaid, and capital markets began demanding sharply higher interest rates before they just stopped lending to them altogether.

One proposed solution is to allow Puerto Rico to avail itself of Chapter 9 bankruptcy. Under Chapter 9, municipalities and public agencies can get court protection to reorganize their finances, but a state cannot. However, the island’s government and the U.S. Treasury argue that this isn’t sufficient: While over two-thirds of Puerto Rico’s debt would be covered under a Chapter 9 bankruptcy, they propose a legislative change that would allow all of its debt to be covered by bankruptcy protection, an unprecedented step.

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