Monday, January 30, 2017

Fertilizing Green Chemistry: How an Occupation Renews Itself

Green chemistry is a set of principles to make chemistry healthier, safer, and more environmental. It has made significant changes in how chemistry is done, and in a way that is very different from how we usually think of reforms in organizations. Usually we think of a powerful outside actor starting reform, like the state, not individuals in an occupation. Usually we think of reforms as a series of prescribed practices, not as principles that each actor translates into practices. With no powerful actor to prescribe and no practice to prescribe, it seems like a puzzle that green chemistry could even become important. How did it happen?

The answer is connected to a set of mechanisms that describe how occupations can change themselves, and is described in a paper by Howard-Grenville, Nelson, Earle, Haack, and Young in Administrative Science Quarterly. The method behind the mechanisms is based on two ideas: change is voluntary, and the people in the occupations are highly diverse. As a result, many people with different views and professional practices need to be persuaded. This is a common problem for social movements that seek to reform occupations from inside, so it is broader than the specific case of green chemistry. And, it is a complicated problem too, as green chemistry showed.

The advocates of green chemistry used three methods: 1) portraying it as normal, 2) explaining how it was morally right, and 3) saying it was a pragmatic approach. Each of these three methods had limited success because they were tailored to specific chemist roles, but in total they were effective because they covered key roles in the occupation. Normal portrayals matched the chemistry professionals as being innovators. Moralizing worked through the teaching role that many of them had. Pragmatic matches their role is industrial problem solvers.  Any chemistry professional might spend some time in each of these roles, and some were heavily dedicated to one of them, making them open to influence through these different methods.

But using three methods has one disadvantage: they are inconsistent, and this is easy to recognize. The inconsistency of the methods also led to inconsistency in the principles – imagine how much stricter the moral approach was – and lack of clarity in how one could do green chemistry. However, the inconsistency was not enough to make green chemistry fail. Because many chemistry professionals accepted these principles, as a result of any of the three methods of persuasion, they instead turned their focus on how to make them consistent – either by finding ways to integrate them, or by finding ways of switching focus depending on circumstances.

This is interesting because it suggests that internal reform does not work the same way as a political movement. Political movements thrive on apparent consistency in messaging and principles, and will typically try to solve (or deny) inconsistency before turning to advocacy. Occupational movements do not need consistent messages, but rather that each individual occupation member is convinced. They will later find ways to solve the inconsistency, because occupational members – unlike political movements – encounter inconsistency in their daily work and are used to finding solutions. Green chemistry has succeeded through a combination of persuasion methods followed by problem solving.

Monday, January 23, 2017

War, Exploration, and Interference: The Rise of Amateur Broadcasters

In daily life we know that professionals rule the roost. Anything remotely important is done by a profession with restricted access to practice and many rules for practitioners -- or it is done illegitimately. Did you undergo medical treatment last time you were ill, or did you see a homeopath? Many activities that seem easier and safer also take on profession-like features. Espresso making is done by a high-pressure machine, but there is still a barista profession with formal training and certification. Researchers also have been interested in professions, especially because their effects range from regulating the safety and quality of important service (again, think doctors) to restricting access to work in a way that looks like a power grab (pick your favorite example).

So is there room for non-professionals to get things done? Gregoire Croidieu and Phillip Kim answer that question in a recent article in Administrative Science Quarterly, looking at the key role of amateurs in the development of radio broadcasting in the US. They show that amateurs can get a significant role if the right conditions are in place, even as professionals, companies, and the state seek to push them to the margins. How? Well, that’s where the war, polar exploration, and interference come in.

Let’s start with interference. Technically that is what happens when radio transmitters are near each other in signal spectrum and physical space, and distort each other’s transmissions. It was a major reason that many sought to limit access to the airwaves of amateurs, especially those building their own transmitters and behaving independently from the profession. Socially the limitation of access was also a form of interference – trying to make it hard to be an amateur. But radio amateurs were enthusiastically building up their lay expertise and using it, legally or not. Except for the WWI years, they could be given access as registered radio operators.

That brings us to the war. WWI was when radio amateurs were blocked from the airwaves, with security given as the reason, but it did not mean that they stopped broadcasting. They signed up for military service instead, and fully half of the military radio operators were originally amateurs. This was when the state recognized the value of the lay experts, and took advantage of their skills. After the war, they were supposed to return to their old status as marginal actors, more than before (rising to 20,000 in 1922), but still regulated and limited. Professional radio operators still campaigned against amateurs, seeing them as having little value.

This is where the polar explorations come into play. The amateurs were many, highly skilled, and willing to experiment, and they soon registered a series of technical accomplishments – including shortwave communications with the North Pole, which had been thought impossible. The amateurs, through their lay expertise, became leaders in radio. This role soon turned into the start of radio as an industry and as lay culture, because the establishment of radio stations for communicating to many – instead of point-to-point – happened in parallel. Radio ownership and interest in radio listening rose also, and the radio broadcasting industry eventually grew to as many radio stations as there were licensed radio operators in 1921.

War, exploration, and interference were three of the elements that brought amateurs to the forefront of radio, against the resistance of professionals, companies, and the state. Clearly it was not an easy process, and it took a lot of interest to gather the necessary momentum. Does this show that amateurs have a clear role in society, or that they can overcome the odds under special circumstances? We clearly need to learn more about this so we can understand when activities become professionalized, and when they are open to amateurs.

Croidieu, G., Kim, P.H. (2017). Labor of Love: Amateurs and Lay-expertise Legitimation in the Early U.S. Radio Field. Administrative Science Quarterly

Sunday, January 15, 2017

Albert Dunlap Style Likability: Those Who Seek Flattery Get Enemies

I will start this post with an old story. CEO of Sunbeam Corp., Albert Dunlap, known as an expert in turning around troubled firms and selling them for a profit, was sued by the SEC in 2001 for accounting fraud. He was eventually barred from serving as an officer or director in any company, plus ordered to pay investors defrauded money in a class-action lawsuit.  Albert Dunlap was clearly someone in need of flattery, not just money, as he had the classical flattery-sickness symptom of a book written to celebrate his successes (see also his picture!). How he managed things internally in each firm he led is disputed, but much was said about his intimidation of other managers, who probably would conclude that a lot of flattery and ingratiation might help their career. Of course, managers still did better than employees, because his signature move in turning firms around was mass layoffs.

An interesting detail of his downfall was that managers around him were quick to release information that helped the investigation, which is distinct from the many firms with management teams that do all they can to deter and obstruct investigators. Is there a systematic reason for this difference? Possibly. A recent article in Administrative Science Quarterly by Gareth Keeves, James Westphal, and Michael McDonald looks at what happens when managers ingratiate their CEO through flattery and other tools. Their findings are interesting. First, managers who flatter lose their liking of the CEO. Somehow when people artificially put others on a pedestal they also start looking down on them.

Second, managers who flatter may go on to undermine the CEO. The light-handed version of this is to undermine the CEO’s messages to journalists, as this research showed. The heavy-handed version is what happened to Albert Dunlap. Among other events, his comptroller reported that he had been pushing for accounting practices that crossed the legal boundary, and sales people were quick to report “channel stuffing.” Channel stuffing is to sell too many goods and selling them too early, which is not illegal in itself (the sales channel can return unsold goods, so it is safe for them), but it is illegal when the sales are accounted as if they were final.  Those were practices that the SEC (and some investors) suspected, and that meant that what looked like a turnaround in sales and profits was actually a fraudulent scheme.

Seeking flattery is never thought of as a good thing. What we now know is that it also triggers undermining, and for those who have real weaknesses – like a CEO engaged in fraud – that undermining can be very consequential.

Monday, January 9, 2017

Who Admires Martin Shkreli? How we respond to Controversies about Firms

Martin Shkreli is listed as an entrepreneur, hedge fund founder, and pharmaceutical executive. All of these are good things, at least to people who appreciate the formation of new ventures, financing of ventures, and work to improve healthcare. He has also been described as the “most hated man in America.” The trigger for this was when his company Turing Pharmaceuticals acquired the drug Daraprim, an essential drug for treating AIDS-related parasitic disease, and raised the price from USD 1,350 to USD 75,000 for a monthly course of treatment. Denouncements from individual doctors followed, then from associations, and finally the US congress and presidential candidates singled out Turing and Shkreli for critique.

High drug prices are not unusual in the US, however. The most recent top 10 list of drug prices I have seen posts two Hepatitis C treatments from Gilead Sciences at the very top, both above Daraprim. There are some differences that might explain this. First, Daraprim actually cost 13 times more in the US than in most other developed nations before the price increase, which increased the price by another 56 times. As a result, in the US patients pay 750 dollar for a pill that costs 1 dollar in Australia. Second, Daraprim is an old drug with no patent, so it could be made and sold generically – but Turing has distribution rights preventing that from happening. Gilead’s drugs are recently developed and under patent still.

But we should not make too complicated explanations of things that have simple reasons. In a recent paper in Administrative Science Quarterly, Sinziana Dorobantu, Witold Henisz, and Lite Nartey look at how society responds to controversies about firms, and they find very clear patterns. Moreover, they look at gold mining internationally, so their research is free of any specifics of the US and the pharmaceutical industry. Their explanation is simple and provocative: history and track record matter.

First, people form beliefs about firms based on how they have behaved in the past, and will lash out at firms with past misbehavior. Shkreli already had triggered a pricing controversy, so he definitely fit this pattern.  Second, the early statements from stakeholders set the tone for the rest, both because others often follow their assessment of an action as bad (or good), and because prominent stakeholders are imitated by others. Shkreli’s initial critics included Infectious Diseases Society of America, which is easily among the most prominent voices for this form of health care. Third, how people form beliefs about firms is largely a function of firm track records. Often a firm will have defenders who try to counter criticism, but friends are earned through actions. Martin Shkreli had no friends rising in defense, and no track record suggesting a reason for having any.

A true cynic might note that none of this matters, because getting 750 per pill is still a lot better than getting 13.50, or 1 dollar. But here the research by Dorobantu, Henisz, and Nartey shows that the cynic should be careful, because the stock market pays close attention to critics of the firm, and the firm loses value when it is under fire for misbehavior. In the case of Turing’s price increase, things went even further. Because drug pricing was getting legislative attention, the Nasdaq Biotech Index fell 4.4%, shrinking the value of an entire industry as a result of the actions of one company.