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In a world crawling with things that go bump in the night, fresh terrors lurk behind every corner. There are the usual suspects — slithering snakes, terrifying tarantulas, that clown from your sixth birthday party. But in today’s age, we’re just as likely to be haunted by credit default swaps or unemployment statistics.
This week, fearless faculty from the McCombs School of Business explore the dread of deal-making, the macabre behind the money, the horror of high finance. Proceed if you dare.
Triple Witching
Four times a year, an unholy occurrence casts a spell over the stock market, stirring up mayhem and mischief most foul. On the third Friday of March, June, September and December the contracts for index futures, index options and regular stock options all expire. All that activity of closing out contracts tends to spook investors, says Jim Nolen, distinguished senior lecturer of finance.
Those days — known as triple witching — threaten to increase volatility in the market. For instance, as the contracts expire on index funds (bundles of different stocks meant to be representative of the overall market), fund managers may close out their positions or adjust their portfolios.
The volume of trading typically takes a particularly sharp increase during the last hour of the trading day — by as much as 5-10 percent. It’s a small percentage, but still significant, as that may represent millions of shares, says Nolen.
The activity also could trigger movement among program traders–automated trading based on algorithms that call for buying or selling once stocks hit a certain price. (For an example of how quickly volatility and program trading can spiral out of control, one need only look at the fallout of this May’s “fat finger” incident, when a trader allegedly typed “billion” instead of “million,” setting off a wild day of trading that resulted in the largest single-day drop in the history of the Dow Jones industrial average.)
So is anyone safe from the dark forces of triple witching? While day traders may live and die by the market’s daily gains and drops, most long-term investors will survive with little more harm than a wart or two.
Zombie Institutions
What happens when dead financial institutions are allowed to continue to function? Will the healthy survive? Senior Lecturer of Finance Michael Brandl investigates.
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Psychometrics
Anyone who has ever worked on a team of mismatched personalities knows what a nightmare it can be. So perhaps psychometrics — the field of mental testing often used in evaluating employees regarding their psychological capabilities — is aptly named. But have no fear, personality testing can be used to create the ideal team, or at least avoid a disaster.
Senior Lecturer of Management Kristie Loescher is an expert on organizational behavior and uses psychometric testing in her classes and consulting with companies.
“My big goal is to help people understand what flavors we come in,” says Loescher. “When someone is different, they’re not trying to make you mad. We put too many character judgments on things that really have to do more with wiring.”
There are two main types of tests: descriptive-tests such as the Myers-Briggs Type Indicator where there are no right or wrong answers; and prescriptive-tests that do have right or wrong answers and are designed to discover potential weaknesses.
The Myers-Briggs is the most common personality test in the world — many people know their four-letter type that identifies their personality: Extrovert/Introvert (E/I), Sensing/Intuitive (S/N), Thinking/Feeling (T/F) and Judging/Perceiving (J/P).
Loescher offers these tips for making the most out of teams in the workplace:
- Extroversion/Introversion isn’t about being a social butterfly or a wallflower. “It’s about where you get your energy,” explains Loescher. “For an extrovert, after attending a football game, you want to go dancing. If you’re an introvert, you want to take a nap.” So how does this apply to the office? Take steps to accommodate both personality types. For instance, when planning a meeting, distribute the agenda in advance so introverts have a chance to process information on their own. And allow for discussion time during the meeting so extroverts can interact with others.
- The Sensing/Intuitive trait deals with how we gather information. Sensors pay attention to concrete observations while Intuitive types think more abstractly. When trying to sell a new idea to someone, alter the pitch based on his or her type. Sensors will want a lot of details, while an Intuitive will need to see the big picture.
- The Thinking/Feeling dichotomy can easily lead to misunderstandings and hurt feelings if each type doesn’t try to understand the other’s perspective. Loescher, a Thinker, remembers when she was a hospital administrator and she moved staff parking farther away from the building in order to give patients more spaces. In her mind, it was a reasonable decision–patients should get priority. So she was surprised by the emotional response from Feelers on staff who saw the move as not valuing employees. Loescher suggests that Thinkers run key decisions by a Feeler in order to “avoid stepping on emotional minefields.” She adds that Feelers also need to learn how to forgive. “Thinkers will unintentionally hurt their feelings, and they’ll carry a huge burden if they don’t let that go.”
- Judging/Perceiving classifies how people operate with the outside world on a daily basis. The Judging type tends to live by the book, prefers order and finds joy in closure. Perceivers are more comfortable with ambiguity and spontaneity. “Most of the world is a ‘J,’ so P’s need to find a way to function within that framework,” says Loescher. “Get a secretary as soon as possible, set clocks early so you get out of the house on time.” Alternatively, Judgers need to understand that Perceivers will thrive with some freedom from structure. “If you expect a ‘P’ to be at work at 7 a.m. every day, you’re going to end up firing that person,” cautions Loescher. “A ‘P’ will be more productive with some flexibility.” (Bill Gates and Michael Dell are classic Perceivers, Loescher notes.)
A Personality to Die For
Test your personality online:
Myers-Briggs Type Indicator
The most commonly used personality test, based on the research of Carl Jung, Katharine C. Briggs and Isabel Briggs Myers. The Myers-Briggs is a descriptive test that categorizes people into 16 personality types based on four different scales.
International Personality Item Pool Representation (IPIP-NEO)
A prescriptive test based on the five factor model of personality. The five factors are openness, conscientiousness, extraversion, agreeableness and neuroticism. When putting teams together, Loescher advises trying to strike a balance between different types in order to check strengths and weaknesses. For instance, if a team has all Perceivers, they often generate too many ideas to focus. However, if a team is all Judgers, it will complete the work, but it could be overly safe. A team of Perceivers and Judgers working together will get the job done and produce creative results.
Loescher says that ultimately psychometrics testing is about taking advantages of people’s strengths and hard-wiring and understanding each other better.
“Diversity means appreciating the value of having different perspectives around the table,” says Loescher. “A diverse work team is no good if you don’t understand them.”
Ghost People
They wander the halls of the office, but no one knows who they are. Professor of Management and Communication Studies John Daly tells their haunting story.
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Gross Domestic Product
The global economy is in a fairly frightening state right now. Finding good news is about as difficult as convincing kids that the raisins you gave them for trick-or-treating are as good as candy. But a few corners of the planet are seeing signs of life and will dramatically change the world in years to come, from import and export partnerships to an unprecedented rise in the world’s middle class population.
Gross domestic product (GDP) is the most commonly used indicator of a country’s overall economic output, measured by the market value of all goods and services produced in a country. GDP can offer a snapshot of a country’s economic health at any given time. Senior Lecturer of Management John Doggett shares some hair-raising GDP statistics to shed light on the changing world economy:
- As of April 2010, the economies of Brazil, Russia, India and China (collectively known as the BRICs) were 23.5 percent of global GDP. That is $2.2 trillion larger than America’s GDP.
- China is now the world’s second largest economy and India is the fourth largest. “The trade implications are obvious,” says Doggett.
- China, India and Brazil were the only countries in the top 10 GDPs to experience positive growth in 2009. The United States, Japan, Germany, the United Kingdom, Russia, France and Italy saw declines in GDP.
- Goldman Sachs predicts that by 2050, China will be the largest economy in the world, with India and the United States tied for a distant second. How we react to this opportunity and our new competitors will affect the standard of living for future generations. “This is the greatest possible time to be alive and be a businessperson,” says Doggett.
They’re Baaaack
Even more terrifying terminology: Category killer — A business or product that is so successful that it drives out nearly all competitors from its market.
Creeping inflation — A gradual, marked increase in inflation from year to year, by as little as 3 percent annually.
Dead time — Those long, dull windows of time at the office when there is either no work to be done or it is being avoided at all cost. May or may not correlate with an increase in Farmville activity.
Headhunter — A personnel recruiter, often used to place candidates at the executive level.
Moonlighting — Working a second job, often during the late hours of the night. Not to be confused with the 1980s romantic comedy-drama television series starring Bruce Willis and Cybill Shepherd.
Phantom income — Income that is taxable but does not actually generate cash flow.
Predatory pricing — The offering of products and services below cost as a means of driving a competitor out of business or an exclusive market.
Skeleton crew — A reduced number of employees, typically covering slow periods of work.
