Knowledge at Wharton

The new president’s job says one Wharton professor ”will be as hard as any job any person has ever had.” For the 44th president of the United States extraordinary managerial and cognitive abilities will be needed to tackle unprecedented challenges including wars being waged in two countries and a financial system on the verge of collapse. Wharton and University of Pennsylvania faculty members offer their views on which leadership qualities will be most important over the next four years and why. This article is the third in a series about economic and leadership issues focusing on the November 4 election.

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Ann Taylor Stores -- a New York-based retailer of upscale women’s clothing -- is using a new computer scheduling system that assigns the busiest and most desirable hours to employees with the strongest sales numbers. Those with less success on the selling floor get far fewer and less desirable hours when new schedules are posted. While systems like these can help improve productivity Wharton faculty and others warn that they are no substitute for hands-on management when it comes to dealing with workers.

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According to Hal Sirkin senior partner and managing director at The Boston Consulting Group ”The age of globalization is over.” In its place is a new reality that Sirkin and BCG colleagues Jim Hemerling and Arindam Bhattacharya define in their recently published book GLOBALITY: Competing with Everyone from Everywhere for Everything. In an interview with Knowledge at Wharton Sirkin describes how rapidly developing economies like India and China have changed global business from a ”one-way street” benefitting Western multinationals to a two-way competition in which ”blending the best of the East with the best of the West is most likely the winning formula.”

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The government’s refusal to save Lehman Brothers begs a question: Why did it step in only a week earlier to risk up to $200 billion in taxpayer money to shore up mortgage giants Fannie Mae and Freddie Mac? Wharton faculty say the government made the right move -- and offer suggestions for the next step.

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Executives at AIG Bear Stearns Lehman Brothers Fannie Mae and Freddie Mac may have ignored or failed to see the level of risk their companies were taking on in a crusade to enhance results and their own compensation according to Wharton faculty and industry analysts. In some cases the management crisis was fueled by managers simply choosing not to lead.

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Big market downturns and jarring volatility have left small investors feeling whipsawed -- and nervous. But it would be a mistake to abandon classic long-term personal finance principles in the face of recent challenges. The 60% stocks 30% bonds and 10% cash approach remains the best strategy. Wharton finance professors Jeremy Siegel Richard Marston and Franklin Allen explain why.

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The rescues bankruptcies and dizzying write-downs for Fannie Mae Freddie Mac Lehman Brothers Merrill Lynch AIG and other giants of international finance signal a reckoning for Wall Street wizards who engineered the ongoing credit crisis with opaque securities based on risky subprime home loans and the assumption that housing prices would never decline according to a panel of Wharton professors. The flood of bad debt they add won’t subside anytime soon.

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After refusing to bail out Lehman Brothers the government agreed to an $85 billion loan to insurance giant AIG effectively taking over the company. Knowledge at Wharton talked to Wharton insurance professors Olivia Mitchell and Kent Smetters to find out how the world’s largest insurer got into this situation and how it can be prevented from happening again.

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The government’s rescue of Fannie Mae Freddie Mac and AIG demonstrated clearly that the financial turmoil continues on Wall Street. In an interview with Knowledge at Wharton Wharton finance professor Jeremy Siegel says there are some positive signals in stocks and corporate earnings but that it’s too soon to conclude the market has hit bottom. Siegel also talked about inflation and commodities.

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Casual observers may have concluded that Google’s introduction this week of its ’Chrome’ web browser was a direct assault on the dominance of Microsoft’s Explorer. But Wharton professors David Hsu and Kevin Werbach see a longer-term strategy at work.

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