462. The Science of Management with Nicholas Bloom
unSILOed with Greg LaBlanc
The Impact of Universities on Management Practices
This chapter examines how universities impact the management quality and profitability of businesses in their vicinity. It highlights factors like executive education and socio-economic conditions that contribute to this dynamic.
How do you measure the quality of management at a company? And how much do management practices impact a firm’s overall performance?
Nicholas Bloom is a professor of economics at Stanford University and co-director of the Productivity, Innovation, and Entrepreneurship Program at the National Bureau of Economic Research. His research on working from home and management practices has been published in numerous scientific journals, including the Journal of Political Economy and Nature.
Nicholas and Greg discuss the historical trends of productivity growth, why management is often overlooked as a technological advance, and the challenges of measuring and improving management quality. Nicholas also shares some of his key management tips from his years of studying firms across the world.
*unSILOed Podcast is produced by University FM.*
Episode Quotes:
Is high uncertainty an opportunity for big returns?
43:42: High uncertainty is where the money is. When life's uncertain, that's where the profits have been made. Kind of Warren Buffett/VCs. A good example of that would be the dot-com boom. So, in the dot-com boom, everyone knew in the early 2000s, look, the internet's going to be a big thing. And it turns out it was a big thing. You just don't know which bit and when and how. And so the view is, look, if we invest in the internet, we have a lot of these implicit options on it. And if it takes off, these are valuable. If they’re not, we wasted our money, but no more. And so, there's also kind of what I call exploratory investment when demand or markets are uncertain. You do, on the other hand, want to spend some kind of R&D-ish type money or open subsidiaries or open up a website or whatever. And it's like placing a bet. It's like investment in equity, if you think about it. And if it works out well, great. You've 10x your money. And if it doesn't, you've lost your cash.
The key for hybrid work is coordination
35:53: Hybrid is coordination. So, it sounds obvious, but if you're on a hybrid plan, whereby, say, you've got to be in the office three days a week, you want to make sure it's the same three days as your team because the thing that sends people mad is coming in and then spending all day on Zoom because everyone else is at home.
Why do owners struggle to recognize great management?
23:12: So, part of the problem why management isn't great is that owners don't appreciate it or aren't aware of it. The other hard part of it is that it's intangible, so it's hard to buy it. So, you have ten candidates; they all claim they're great managers. How do you know? It's a tough thing to actually turn. Ten consulting firms—every consulting firm claims that it will make you so much money, but whether they do after the event is much less obvious.
Do government-owned organizations struggle with managing underperformance?
16:34: You find in the data, on average, government-owned organizations tend not to be very well managed, and where they're particularly poor is what I'll call dealing with underperformance. So, if you look at our data, government organizations can be reasonably good at collecting data and having targets, and they can be—they're okay but not great on incentives if you perform well. They're just terrible at dealing with underperformers, and it's partly just politically—it’s painful for politicians; partly they're heavily unionized; partly there's typically also a reason why a government owns a firm.
Show Links:
Recommended Resources:
- Frederick Winslow Taylor
- George Stigler
- Danaher Corporation
- unSILOed episode with John Roberts
- unSILOed episode with Lynda Gratton
- unSILOed episode with Gene Kim & Steven Spear
- Economic Policy Uncertainty Index
- Robert Pindyck
- World Management Survey
Guest Profile:
- Faculty Profile at Stanford University
- Professional Profile on LinkedIn
- Nick Bloom on X
His Work:
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