Apple expansion moves show how Silicon Valley is losing its grip on tech jobs – Lou Shipley

MIT Sloan Lecturer Lou Shipley

MIT Sloan Lecturer Lou Shipley

From MarketWatch 

Apple’s recent announcement that it’s building a new $1 billion campus in Austin, Tex. adds momentum to the trend among tech startups and investors to look beyond Silicon Valley to incubate and grow the next generation of innovative companies.

Moreover, in what amounts to doubling down on its satellite strategy, AppleAAPL, -1.06%  also said it will establish new sites in Seattle, San Diego, and Culver City, Calif., as well as expand in cities across the U.S., including Pittsburgh, New York, and Boulder, Colo. over the next three years — welcome economic boosts for those areas.

I’m not sounding the death knell for Silicon Valley. To be sure, this remarkable region south of San Francisco is still the brightest star in the global tech universe. Silicon Valley will remain Apple’s home base, as well as that of GoogleGOOGL, -1.23%  , Facebook FB, -0.01%  , Cisco Systems CSCO, +0.09%  , OracleORCL, -0.37%  , Intel INTC, -1.35%  and many others. Its position of dominance is not in jeopardy — yet.

Nonetheless, many of the tech startups planting their flag in Silicon Valley to be near angel investors, venture capitalists, investment banks, and tech talent are keeping only small teams there. They are increasingly utilizing less-costly satellite offices, remote co-working spaces, or other remote-work options for the majority of their employees.

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Companies with visionary leaders are hurt if the CEO and chairman roles are split – Egor Matveyev

Visiting Assistant Professor of Finance, Egor Matveyev

From MarketWatch

A number of recent corporate scandals put a renewed focus on the dual role of CEOs serving as chairmen of the board of directors.

Carlos Ghosn of the Renault-Nissan-Mitsubishi Alliance is currently jailed in Japan on charges of under-reporting his pay. Facebook’s FB, -2.22%  Mark Zuckerberg has been criticized on how he managed recent crises, and has been called on to step down from the chairman post. Tesla’s TSLA, -3.96%  Elon Musk had to resign from the chairman role as part of the settlement agreement reached with the Securities and Exchange Commission in its investigation into Musk’s erratic communication through social media, which might have misled investors.

In recent years, the number of CEOs in a dual CEO-chairman role in large U.S. firms has been steadily declining. In the mid-1990s, about 65% of all firms were led by CEOs who were also chairmen. Most recent data from fiscal 2017 show that this number is down to 41%. Given the public pressure to separate CEO and chairman positions in publicly traded firms, this downward trend is expected to continue.

Advantages, disadvantages

There are many potential benefits that come from splitting the roles of the CEO and the chairman. First, it puts checks and balances in place, and ensures that important decisions are weighted and, if needed, challenged. Second, it sends a signal to all stakeholders — employees, business partners and shareholders — that the firm has two centers of power, and therefore is likely to be more stable. Third, it shows that the firm is more likely to be equitable, which may increase its appeal in the eyes of customers, prospective employees and business partners.

While the benefits are frequently discussed, costs are rarely mentioned. In my recent work with co-authors, we show that having additional power amplifies the effect of both good and bad CEOs on firm value and performance. It means that if the firm is single-handedly run by a powerful CEO, disastrous events, such as suspected fraud in the case of Nissan or misleading investors through social media in the case of Tesla, are more likely to happen. On the flip side, however, it also means that strong, visionary leaders benefit from being able to run their firms as they see fit and having their business decisions unchallenged. Many of the great success stories, such as Apple AAPL, -0.87% (under Steve Jobs, until his death in 2011), Amazon AMZN, -0.72% (Jeff Bezos) and Netflix NFLX, -1.50%(Reed Hastings) are all associated with powerful chairmen-CEOs. As we know, the ability to move fast and execute is critical in fast-moving industries.

Effect on shareholders

We show that these amplification effects of powerful CEOs on shareholder value are very large. For example, while good CEOs on average account for 4% of their firms’ value, good CEOs who have more power account for as much as 9%. Conversely, while bad CEOs on average can destroy up to 3% of shareholder value, bad CEOs with more power destroy more than 5%.

Read the full post at MarketWatch.

Egor Matveyev is a Visiting Assistant Professor of Finance at the MIT Sloan School of Management.

The good jobs strategy – Zeynep Ton

MIT Sloan Adjunct Associate Professor Zeynep Ton

MIT Sloan Adjunct Associate Professor Zeynep Ton

From Acast. 

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Zeynep Ton is a Professor of Operations Management at the MIT Sloan School of Management.

She studies the retail sector and the way that some firms have invested in paying more and doing more for their workers. She studied firms like QuikTrip, Trader Joes, Mercador in Spain – she found that firms that treat their workers better achieve better results.

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Why GoPro needs to pick a model–John Carrier

MIT Sloan Sr. Lecturer John Carrier

MIT Sloan Senior Lecturer John Carrier

From Huffington Post

GoPro’s recent loss of $107.5 million is certainly dramatic. After all, last year it announced a profit of $16.8 million. However, it’s also a cautionary tale for all new companies that find themselves in a similarly precarious financial position after enjoying rapid financial success. When this happens, it’s time to take a hard look at the business model.

The big question the company should ask is whether it aspires to be more like Crocs, Chrysler, or Apple. These three companies have all found varying degrees of success through very different models. Each offers substantial pros and cons so it is important for GoPro to know its vision and find the right fit.

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A deep look inside Apple Pay’s matchmaker economics – Richard Schmalensee and David S. Evans

MIT Sloan Professor Richard Schmalensee

MIT Sloan Professor Richard Schmalensee

From Harvard Business Review

Standing on stage on September 9, 2014 at Apple’s Worldwide Developer’s Conference (WWDC), Tim Cook announced, “We’ve created an entirely new payment process, and we called it Apple Pay.” Cook displayed a video of a woman who held her iPhone 6, the company’s upcoming upgrade, near a payment terminal.  She paid in the blink of any eye. “That’s it,” Cook said, exclaiming twice over “just how fast and just how easy” the new payment method was. An Apple press release claimed the new service would “transform mobile payments.”

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