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Clayton Christensen on Religion and Capitalism

Question: Why is there such a crisis in business leadership?

Christensen:    Can I just maybe make two provocative comments, which are not that provocative but I really believe that they’re true.  There is a fellow that came to Boston about 10 years ago who is a Marxist economist from China and he’d gotten a Fulbright Scholarship.  And he came to Boston to study capitalism and democracy of all of the arcane topics.  We got to know him very well while he was in Boston, so at the end of his time, we invited him and his wife and child to our home just to have a goodbye dinner.  And I asked him, “So of all the things you learned about capitalism and democracy while you were here, was there something that was very surprising to you that you just did never thought about before?”  And with no hesitation, he said, “Yeah.  I never understood how critical religion is to the functioning of free markets and democracy.”  And I’d never put these things together before but it’s like this guy flies in from Mars and this is what he sees.  And he said, “You guys are living on cultural momentum that’s actually losing its momentum now.  But if you go back 150 or 200 years ago, almost everybody in America on the weekend went to a synagogue or a church and they were taught there by people who they respected that they should voluntarily follow all the rules, because even if the police did not catch them, God will catch them.”  And so you’ve got to be honest, whenever you make a commitment, honesty requires that you follow through.  You’ve got to respect other people’s property and never take it from them.  Their life and freedom are as just as valuable as yours.  And he said, “Because most Americans most of the time have voluntarily followed the rules, democracy works.”  Even if the police don’t show up on your doorstep to beat you up, you pay your taxes, because we’re conditioned and the root cause was it was our religion’s that instilled in us that ethic.  Now, he said, you just look around the world where America has gone into a country and just snap its fingers and said we want democracy right here and we want it right now, if you don’t have a foundation of a religion there and you said it’s not any religion, that it’s got to be a religion that teaches those particular rules and has enough power over people’s lives that they instinctively follow those rules.  If you try to put free markets and democracy into a country that doesn’t have that foundation, all you get is chaos like Haiti, for example, where they don’t have that foundation, we try to impose democracy and free markets and just get a complete breakdown of social order.  It’s what happened in Russia to a large extent.  So my first concern about our system is that if you don’t have an instinct and generally born from a religious tradition amongst the CEOs to voluntarily follow the rules, capitalism just doesn’t work.  There is no way that you can police honesty if it doesn’t come instinctively for you.  And, you know, I thought a lot about this conversation with that Marxist economist, and as so many institutions in our society try to push religion out of the public eye, what they don’t get is these are the very institutions that gives us our civil liberties in the first place.  So it’s a broader issue than just CEOs, but if the CEOs don’t come with that commitment to honesty, it’s very hard to police it.  It’s very hard to instill it later on.  The second thought is that the economists have done a great disservice to capitalism with this notion that managers are responsible for maximizing shareholder value.  It turns out God did not reveal this to any of the prophets of prophet, but rather economists in the 1800s as they were building mathematical models of microeconomic problems, the tools of economists are calculus.  And calculus forces you to find some function that you can maximize or minimize, and so they began to make assumptions in these mathematical models that management’s responsibility is to maximize the return to shareholders.  And the use of that assumption made the mathematics [tractable].  And so more and more economists began to use that assumption, they’d go into classrooms, teach that assumption and their models to their students.  And somehow over the hundred years or so that intervened, it came to be believed that management is responsible for maximizing shareholders value.  That even has gotten ensconced into some laws.  And then another group of economists came in with this theory called the principal agent theory and the idea there is that the principals who are the managers have a different motivation than the…  I’m sorry, the agents who are the managers have a different motivation than the principals who own the stock.  And so in order to align their motivations, we have to have, we have to give to management a financial incentive to maximize shareholder value.  And so, over the last 20 years, these principal agent economists have so influenced boards of directors that they’ve given the managers of these companies’ extraordinarily attractive financial incentives to inflate the stock prices and so on.  And I think this is just, it’s a broken paradigm.  In the 1960s, the average shareholder held the shares of your company in her portfolio for six years.  Today, 40% of the trading on the stock exchange is done by hedge funds whose average holding period is 60 days.  Fifty-five percent of the activity on a typical day on the stock exchange is executed by mutual funds and pension funds whose average holding period is 10 months.  So, 95% of the volume is executed by people who don’t even hold the shares of your company for a year.  Do you want to call these people shareholders?  They’re not.  They’re speculators or investors who temporarily find themselves owning the securities of your company.  And so rather than the management believing that they’re responsible for maximizing shareholder value, it’s really time to say no.  You guys temporarily find yourself in possession of the securities of my company and you’re responsible for maximizing the returns on your investments and God bless you.  My responsibility is to invest to ensure the long-term health of this company, the prosperity of the employees who work within it and the communities in which the employees live in and which we do our work, and that really is what management ought to focus on doing well.  And this business that managers aren’t incentivized, anybody who knows a manager knows that these are driven people to achieve and to build and to do good things.  And what the economists have done to us by giving this people financial incentive is just really perverted the system.  And so I think if we can get rid of those assumptions that you’ve got a principal agent problem and that managers are responsible for maximizing the income of speculators, if we took them out and brought people who just had a great grounding in the value of honesty because of their background, the CEO problems will disappear.

Clayton Christensen on rescuing free markets.

The “new normal” paradox: What COVID-19 has revealed about higher education

Higher education faces challenges that are unlike any other industry. What path will ASU, and universities like ASU, take in a post-COVID world?

Photo: Luis Robayo/AFP via Getty Images
Sponsored by Charles Koch Foundation
  • Everywhere you turn, the idea that coronavirus has brought on a "new normal" is present and true. But for higher education, COVID-19 exposes a long list of pernicious old problems more than it presents new problems.
  • It was widely known, yet ignored, that digital instruction must be embraced. When combined with traditional, in-person teaching, it can enhance student learning outcomes at scale.
  • COVID-19 has forced institutions to understand that far too many higher education outcomes are determined by a student's family income, and in the context of COVID-19 this means that lower-income students, first-generation students and students of color will be disproportionately afflicted.
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A massive star has mysteriously vanished, confusing astronomers

A gigantic star makes off during an eight-year gap in observations.

Image source: ESO/L. Calçada
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  • The massive star in the Kinsman Dwarf Galaxy seems to have disappeared between 2011 and 2019.
  • It's likely that it erupted, but could it have collapsed into a black hole without a supernova?
  • Maybe it's still there, but much less luminous and/or covered by dust.

A "very massive star" in the Kinman Dwarf galaxy caught the attention of astronomers in the early years of the 2000s: It seemed to be reaching a late-ish chapter in its life story and offered a rare chance to observe the death of a large star in a region low in metallicity. However, by the time scientists had the chance to turn the European Southern Observatory's (ESO) Very Large Telescope (VLT) in Paranal, Chile back around to it in 2019 — it's not a slow-turner, just an in-demand device — it was utterly gone without a trace. But how?

The two leading theories about what happened are that either it's still there, still erupting its way through its death throes, with less luminosity and perhaps obscured by dust, or it just up and collapsed into a black hole without going through a supernova stage. "If true, this would be the first direct detection of such a monster star ending its life in this manner," says Andrew Allan of Trinity College Dublin, Ireland, leader of the observation team whose study is published in Monthly Notices of the Royal Astronomical Society.

So, em...

Between astronomers' last look in 2011 and 2019 is a large enough interval of time for something to happen. Not that 2001 (when it was first observed) or 2019 have much meaning, since we're always watching the past out there and the Kinman Dwarf Galaxy is 75 million light years away. We often think of cosmic events as slow-moving phenomena because so often their follow-on effects are massive and unfold to us over time. But things happen just as fast big as small. The number of things that happened in the first 10 millionth of a trillionth of a trillionth of a trillionth of a second after the Big Bang, for example, is insane.

In any event, the Kinsman Dwarf Galaxy, or PHL 293B, is far way, too far for astronomers to directly observe its stars. Their presence can be inferred from spectroscopic signatures — specifically, PHL 293B between 2001 and 2011 consistently featured strong signatures of hydrogen that indicated the presence of a massive "luminous blue variable" (LBV) star about 2.5 times more brilliant than our Sun. Astronomers suspect that some very large stars may spend their final years as LBVs.

Though LBVs are known to experience radical shifts in spectra and brightness, they reliably leave specific traces that help confirm their ongoing presence. In 2019 the hydrogen signatures, and such traces, were gone. Allan says, "It would be highly unusual for such a massive star to disappear without producing a bright supernova explosion."

The Kinsman Dwarf Galaxy, or PHL 293B, is one of the most metal-poor galaxies known. Explosive, massive, Wolf-Rayet stars are seldom seen in such environments — NASA refers to such stars as those that "live fast, die hard." Red supergiants are also rare to low Z environments. The now-missing star was looked to as a rare opportunity to observe a massive star's late stages in such an environment.

Celestial sleuthing

In August 2019, the team pointed the four eight-meter telescopes of ESO's ESPRESSO array simultaneously toward the LBV's former location: nothing. They also gave the VLT's X-shooter instrument a shot a few months later: also nothing.

Still pursuing the missing star, the scientists acquired access to older data for comparison to what they already felt they knew. "The ESO Science Archive Facility enabled us to find and use data of the same object obtained in 2002 and 2009," says Andrea Mehner, an ESO staff member who worked on the study. "The comparison of the 2002 high-resolution UVES spectra with our observations obtained in 2019 with ESO's newest high-resolution spectrograph ESPRESSO was especially revealing, from both an astronomical and an instrumentation point of view."

Examination of this data suggested that the LBV may have indeed been winding up to a grand final sometime after 2011.

Team member Jose Groh, also of Trinity College, says "We may have detected one of the most massive stars of the local Universe going gently into the night. Our discovery would not have been made without using the powerful ESO 8-meter telescopes, their unique instrumentation, and the prompt access to those capabilities following the recent agreement of Ireland to join ESO."

Combining the 2019 data with contemporaneous Hubble Space Telescope (HST) imagery leaves the authors of the reports with the sense that "the LBV was in an eruptive state at least between 2001 and 2011, which then ended, and may have been followed by a collapse into a massive BH without the production of an SN. This scenario is consistent with the available HST and ground-based photometry."


A star collapsing into a black hole without a supernova would be a rare event, and that argues against the idea. The paper also notes that we may simply have missed the star's supernova during the eight-year observation gap.

LBVs are known to be highly unstable, so the star dropping to a state of less luminosity or producing a dust cover would be much more in the realm of expected behavior.

Says the paper: "A combination of a slightly reduced luminosity and a thick dusty shell could result in the star being obscured. While the lack of variability between the 2009 and 2019 near-infrared continuum from our X-shooter spectra eliminates the possibility of formation of hot dust (⪆1500 K), mid-infrared observations are necessary to rule out a slowly expanding cooler dust shell."

The authors of the report are pretty confident the star experienced a dramatic eruption after 2011. Beyond that, though:

"Based on our observations and models, we suggest that PHL 293B hosted an LBV with an eruption that ended sometime after 2011. This could have been followed by
(1) a surviving star or
(2) a collapse of the LBV to a BH [black hole] without the production of a bright SN, but possibly with a weak transient."