Strategy

The SMR was pleased to conduct a set of launch conferences before its first published issue in 2020. One launch conference occurred at Columbia Business School in the summer of 2019 at which James Gorman, Chairman and CEO of Morgan Stanley served as the keynote speaker. An edited excerpt of part of his address appears below, in which he describes essential elements of his conception of strategy, or his principles of strategy. Kathryn Rudie Harrigan, Henry R.

We analyze a model of hierarchies in organizations in which neither decisions nor the delegation of decisions is contractible and in which power-hungry agents derive a private benefit from making decisions. Two distinct agency problems arise and interact: subordinates make more biased decisions (which favors adding more hierarchical layers), but uninformed superiors may fail to delegate (which favors removing layers). A designer may remove intermediate layers of the hierarchy (eliminate middle managers) or flatten an organization by removing top layers (eliminate top managers).

We consider a liquidation problem in which a risk-averse trader tries to liquidate a fixed quantity of an asset in the presence of market impact and random price fluctuations. When deciding the liquidation strategy, the trader encounters a trade-off between the transaction costs incurred due to market impact and the volatility risk of holding the position.

Employee misconduct is costly to organizations and has the potential to be even more common in gig and remote work contexts, in which workers are physically distant from their employers. There is, thus, a need for scholars to better understand what employers can do to mitigate misconduct in these nontraditional work environments, particularly as the prevalence of such work environments is increasing.

We show that dealer market power impedes the pass-through of monetary policy in repo markets, which is an important first stage of monetary policy transmission. In the European repo market, most participants do not have access to trade on centralized exchanges. Rather, they rely on OTC intermediation by a small number of dealers that exhibit significant market power. As a result, the passthrough of the ECB's policy rate to repo markets is inefficient and unequal.

Stabilizing the world’s climates means cutting carbon dioxide pollution. There’s no way around it. But what if that’s not enough? What if it’s so late in the game that even cutting carbon emissions to zero, tomorrow, wouldn’t do?

Enter solar geoengineering.

The principle is simple: attempt to cool Earth by reflecting more sunlight back into space. The primary mechanism, shooting particles into the upper atmosphere, implies more pollution, not less. If that doesn’t sound scary, it should. There are lots of risks, unknowns, and unknowables.

We study the performance of many traditional and novel, text-based variables for in-sample and out-of-sample forecasting of oil spot, futures, and energy company stock returns, and changes in oil volatility, production, and inventories. After controlling for small-sample biases, we find evidence of in-sample predictability. Our text measures, derived using energy news articles, hold their own against traditional variables.

We study qualitative information disclosure by mutual funds when investors learn from these disclosures in addition to past performance. We show theoretically that fund managers with specialized strategies optimally choose to disclose detailed strategy descriptions, while managers with standardized strategies provide generic descriptions. Generic descriptions lead to errors in benchmarking by investors and thus higher volatility in capital flows.

Many think that they understand the secrets to the success of the biggest tech companies: Facebook, Amazon, Apple, Netflix, and Google. It's the platform economy, or network effects, or some other magical power that makes their ultimate world domination inevitable. Investment banker and professor Jonathan Knee argues that the truth is much more complicated--but entrepreneurs and investors can understand what makes the giants work, and learn the keys to lasting success in the digital economy.