Cornell Business Review Fall 2018 Magazine

TECHNOLOGY

TECHNOLOGY

Live Streaming:

Connecting with Consumers like Never Before

By Winny Sun

I

n the digital age, viewers no longer seem to be satisfied with traditional videos. Content that engages the audience in real time is the new trend. As social media giants develop their own live streaming tools and broadcasting, businesses are beginning to leverage it to their advantage. Nonetheless, as the business world becomes saturated with live streaming, new challenges also surface.

Most major brands are already active on social media. Recently, though, many also began live streaming for marketing, mainly because 82% of viewers prefer live streams to social media posts, as stated by a survey from Livestream and the New York Magazine. Live video allows businesses to more intimately connect with customers. Through a range of content from company tours to live workshops, the company provides viewers with an insider’s look. There is also more engagement during live streaming, since the audience and broadcaster engage in a two-way interaction. During a product demo, for instance, viewers can pose questions to broadcasters and receive instantaneous responses.

Major social media platforms such as Facebook and YouTube have their own livestreaming functions.

While they share many similarities, each platform also has unique capabilities. YouTube is a video search directory, which enables customers to easily look for past live videos, a feature absent on Facebook. Since Youtube videos are searchable, they show up easily in Google and Bing searches, meaning that live content can continue to gain exposure long after it has been broadcasted. Facebook, on the other hand, does not index videos like YouTube.

It prioritizes recent posts over older posts, which makes finding archived videos on Facebook more difficult. Facebook Live benefits from Facebook’s existing user base.

As the social media site with the most users, Facebook helps broadcasters reach large and diverse audiences.

The Coachella Festival is one of the United States’ most popular and profitable music and arts festivals, earning $114.6 million in 2017. The event grew to today’s immense scale with the help of YouTube Live. After

4 | CORNELL BUSINESS REVIEW

launching its first livestream in 2011, Coachella has since broadcasted the show in real time each year. Although some watch the festival for free at home, the livestreaming strategy helped significantly increase brand awareness.

The 2011 livestream, for instance, was viewed more than four million times. Through the live broadcast, people from around the world became interested in the show.

Buzzfeed offers another example of how businesses have successfully leveraged Facebook Live. A recent livestream featured employees wearing name tags and dancing to the upbeat music. By introducing workers to viewers, Buzzfeed showcases the people and culture that make up the company, helping to humanize the brand. Buzzfeed also got the audience involved by asking them to select moves they would like to see and to vote for the best dancer.

Periscope, another popular streaming app owned

by Twitter, capitalizes on its integration with Twitter to let broadcasters easily showcase their content on the social media site. Live streamers can easily tweet out a link which can then be widely shared. This streaming platform generates more influence if the Twitter account already has many followers. Better yet, if the live stream is tied to a trending Twitter hashtag, people who are not followers can still easily find and join the Periscope event. For instance, when the tech company Adobe hosted a product launch on Periscope, it benefited from the trending hashtag #CreativeCloud. Not only were followers of Adobe tuning into the show, but non-followers also joined the Periscope event because they were curious about the trending hashtag.

Even though Periscope was successful in its first year, earning over 200 million live streams, it has since struggled to attract new users. Due to competition from similar platforms, like Facebook Live and YouTube Live, it is imperative for Periscope to find a niche in the livestreaming industry.

Finally, Twitch, owned by Amazon, mainly live streams video games targeted at young audiences. When the site began operating, the majority of its viewers were gamers, and the majority of its advertisers were gaming

companies. Over the years, the site has quickly grown, gaining over 15 million daily users by the end of 2017.

Today, Twitch is full of entertaining and creative streamers who attract the attention of gamers and non-gamers alike. As such, many non-gaming companies have ventured into this new territory in search of marketing opportunities. For instance, KFC partnered with a game that frequently uses the phrase “Winner Winner, Chicken Dinner.” A perfect fit for the KFC brand, the game helped the fast food restaurant promote chicken wings and gift cards. Compared to Periscope and Facebook Live, who have become saturated with marketers, Twitch’s main user base of gamers is relatively unexplored. Companies wishing to create new marketing relationships through live streaming would do well to emulate Twitch.

Businesses can employ livestreaming to boost their influence and profits, if executed correctly. If a business already has a solid social media following, getting people to watch its live stream should not be too difficult. Instead, the main challenge lies in consistently producing high-quality live streams so that audiences are motivated to return and watch more videos. The content needs to be engaging, creative, and tailored to the viewers. Another challenge brands face involves turning audiences into customers. In addition to bringing value to viewers through high-quality content, live content should also include clear calls-to-action. Livestreams should prompt viewers to share the link with others or provide them with easy access to purchase relevant products. However, if the business does not yet have enough social media exposure, increasing promotion over a variety of social media channels warrants greater attention.

Despite enhanced engagement, live streaming platforms have increasingly faced criticism about inappropriate content on their sites.

Since young people regularly use the

platforms, parents are worried about overtly violent and sexual content that their children may stumble upon. For example, Periscope’s inadequate content-policing, which allowed excessive child pornography to infiltrate,

“Businesses can employ livestreaming to boost their influence and profits, if executed correctly.” cost them many viewers. While live streaming sites are intended to allow users to freely express themselves, more regulation and protection by both businesses and the government is needed. Section 230 of the Communication Decency Act, originally passed in 1996, safeguards interactive computer services and their users from liability associated with harmful content shared on the website. However, in this increasingly digital age, as children become active on the internet at younger ages, a recent change to Section 230 requires internet companies to take more active roles in policing online content in order to

afford greater protection for its users.

Nonetheless, more surveillance is a double-edged sword; increased regulation would ensure online safety, but could inhibit engagement, as the content would have to be vetted, as well.

The live streaming industry faces technical challenges, as well. As more people interact with live streaming, their expectations for its functionality also increase. Since some people wish to watch live video in the highest resolution possible, advanced filming equipment and technically-capable streaming platforms are necessary to prevent lagging or low-quality broadcasting. As people now engage with the internet both on computers and mobile devices, businesses need to ensure that the livestreams are compatible across different devices.

Live streaming has enabled businesses to more effectively connect with customers. However, as more companies take to livestreaming, a brand’s core competitive advantage lies in its ability to produce original content. Live streaming is a useful tool, but companies’ abilities to employ it is more critical for their long-term success.

Facebook Live Streaming at a Music Concert CORNELL BUSINESS REVIEW | 5

TECHNOLOGY

TECHNOLOGY

Prefabricated housing is booming in urban areas; companies like Katerra are on a mission to optimize housing construction and design (above)

Prefab(ulous) How Technology is Shaping the Future of Housing Construction

By Rubin Thomas

C

ompared to other industries, progress in the construction industry has been modest over the past two decades. Nearly all industries, from manufacturing to retail, have made use of digitized systems to optimize operations in an increasingly complex and global business environment.

According to McKinsey’s digitization index, however, construction is “among the least digitized sectors in the world.”

In theory, prefab, or off-site construction, should have been the construction industry’s 21st century answer to meet increasing digitization standards.

Prefab has been around for decades and essentially involves designing and manufacturing building components in a factory and later assembling these components on the job site. The result? Buildings can be nearly 80% complete before ever reaching a job site.

The process has several benefits. A 2017 UC Berkeley study showed that prefab construction is 4050% faster than traditional construction due to the the time savings incurred by manufacturing-inspired supply chain optimization. This translates into a lower total cost per square foot due to manufacturing volume and a decreased need for construction labor. Reducing the need for labor also alleviates two important construction in-

6 | CORNELL BUSINESS REVIEW

dustry issues: low labor productivity and an increasing labor shortage. McKinsey states that labor productivity growth in construction has averaged 1 percent per year in the past two decades, compared to 3.6 percent growth in manufacturing and 2.8 percent in the total world economy. This marginal productivity growth costs the world economy nearly $1.6 trillion per year. Moreover, the labor shortage in construction reached an all time high in 2017 and is expected to worsen over the next decade, according to the National Association of Home Builders (NAHB).

So, why has prefab construction failed to gain popularity in light of these potential benefits? The answer, put shortly, is developer uncertainty, manufacturer limitations, and an overall lack of compelling designs at competitive price points. The industry continues to await the player who will “solve the formula” for prefab housing, providing new efficiency benchmarks to a historically stagnant industry without compromising on quality or design.

One company, Katerra, based in Spokane, WA, believes it has a stylish solution to optimizing the building process. Katerra primarily considers itself a tech company and uses a systems approach to building design and manufacturing with the goal of achieving higher quality buildings in shorter times and at lower price points.

The company currently manufacturers prefab building panels in its Washington factory and serves a wide range of markets, including multifamily residential, retail, and education. One of its core technologies is a relatively new material called cross-laminated timber (CLT).

CLT is comprised of three or more layers of lumber that are bonded together at right angles using special adhesives. The material has similar strength as concrete but is far lighter and quicker to assemble. In addition, CLT is much more environmentally friendly as it’s manufacturing process can make use of what are normally considered “junk” trees, with diameters as small as 4 inches.

Researchers predict that, over its lifetime, a CLT building can produce up to 50 percent less carbon dioxide emissions compared to a similar concrete or steel building.

Katerra is currently constructing what will be one one of the first CLT developments in the United States. The project, Kirkland Apartments, is a multifamily residential development near Seattle, which will include 400 units completely manufactured in its Spokane factory. Among the first of its kind, the project will test whether CLT can be brought to an affordable price point using Katerra’s systems-based manufacturing approach.

While Katerra sees a future in panelized prefab construction, another wave of manufacturers envision a different future for construction, specific for urban areas: modular. Think shipping containers 2.0—futuristic “pods” that can be stacked, combined, and moved from location to location. Units are completely assembled in the factory, including all finishes and custom furnishings, and only need to be connected to the plumbing and electrical grids upon delivery.

This approach could potentially change the urban real estate industry due to decreased land constraints. Modular owners could sign short-term leases on “unusable” land, utilizing a host of new and unconventional building sites, including parking lots, rooftops, or mini lots, where a fixed building would be impossible. When site-owners want their land back, modular owners could easily move the units to a different site with little disturbance to the land.

One Texas-based company, Kasita, aims to build on this concept. Kasita is a 3-year-old startup that intends to manufacture extremely versatile steel-built modular units. Units can be stacked on top of one another to create low to mid-rise structures, combined with other units to

Modern prefab units designed exclusively by Kasita (above)

create larger units, and moved to various locations. Currently, at the Austin manufacturing facility, Kasita only produces stand-alone studio units that cannot be stacked.

However, stackable and combinable versions are currently in development and should start shipping in early 2020.

Manufacturing wise, Kasita is similar to a car manufacturer. All units contain the same basic underpinning, turning construction into a manufacturing-inspired, mass-production system, which cuts down on costs as volume builds. This approach makes sense for urban areas, where smaller, more unvarying lots allow for greater uniformity in building configuration and design. The main challenge right now involves figuring out the optimal manufacturing formula, especially since no player has brought modular prefab units to the market at a large scale.

However, with both the panelized and modular approaches to prefab, the question still remains: will such a radical shift in construction methods ever take off? Will manufacturers and developers alike find a financial case to adopt the practice? If the current housing shortage trend continues as analysts predict, such a shift could be necessary. According to the National Association of Realtors (NAR), a decreasing housing supply in 2018 pushed housing prices up nearly 48% compared to 2011.

Wage growth, meanwhile, has only been around 15 percent, making affordable housing options more difficult to come by. The problem is only expected to grow. A McKinsey Global Institute (MGI) report showed that alleviating the housing shortage would require between $9 and Interior of a Prefab house designed and built by Kasita (below) $11 trillion by 2025 just in construction spending. An additional $16 trillion would be needed to cover land costs.

These figures are based on current construction industry stats and would result in a massive increase in housing costs, making it difficult for many people earning below the median income to find adequate housing.

McKinsey projects that the above mentioned figures could be reduced by up to 50% by uncovering new land sources, cutting down on construction costs, and improving building operational efficiency—all areas that both the panelized and modular prefab approaches could effectively address. Prefab construction could potentially offer the only feasible solution to keeping construction costs down and housing affordable for the general population. The need for prefab, then, could be more pressing than ever before.

CORNELL BUSINESS REVIEW | 7

TECHNOLOGY

TECHNOLOGY

The Changing Landscape of Healthcare

By Derek Kartalian

W

e are living in the fourth industrial revolution: the digital age. Companies and entire industries are rapidly revolutionizing to adapt to the latest technological advances. However, some industries are moving faster than others.

The U.S. healthcare system is massive, making up 17.9% of the U.S. GDP, and riddled with inefficiencies, regulations, and outdated systems. Despite major spending on healthcare, many people living in the U.S. still do not receive proper healthcare. Within this massive market, the existing systems need to be updated and modernized to make healthcare more accessible, efficient, and flexible for all. Access to personal

8 | CORNELL BUSINESS REVIEW

and general medical records is highly regulated, and the data currently resides in many archaic systems. For example, a large portion of existing medical data is kept in physical copies, so retrieving it for research or switching healthcare providers can be extremely difficult.

Nonetheless, healthcare companies are making strides to transfer massive amounts of data into digital form.

The first large scale push towards the electronic modernization of health records came from the Department of Defense (DoD) and Department of Veterans Affairs (VA). The priority of these efforts is interoperability, or enhancing the ability of computers and software to exchange information.

The DoD and VA seek to create a system allowing service members to maintain an electronic health record (EHR) that can follow them wherever they go, domestic or abroad, and increase efficiency of care by ease of access to patient health data. With the current system, obtaining patient records can require physical paper exchange between agencies or providers – a slow, outdated, and disorganized system.

Companies like Cognosante, a healthcare IT consulting firm, currently work to create this cloud infrastructure and accompanying Health Information Technologies (HIT) for the U.S. Government’s healthcare system. The success that comes with building operational cloud systems for healthcare enables the exchange of EHRs. As of now, increasing efforts are going toward improving centralized systems of care, such as the DoD, Medicare, Medicaid, etc. The creation of HIT systems on a large-scale basis will lay the groundwork for expansion into the private sector, as well as further integrations of technology into healthcare.

Once a universal and interoperable healthcare cloud system is established, space for further innovation opens up. Increased accessibility to electronic health records through the use of an established cloud infrastructure will likely cause a disruption in our current healthcare system. One large change involves the introduction of direct-to-consumer healthcare products and services, which are supported by advancements in technology. These new services can reach people through the use of digital and mobile channels, which streamlines processes. Healthcare is gradually becoming more accessible, efficient, and personalized. As with many other industries, including

transportation and retail, the digital age allows for instant access and command over products and services. For example, Uber transformed the transportation market by making taxi services easily accessible from a mobile phone – while undercutting the outdated and inefficient taxi system.

In the same fashion, our current system for scheduling a doctor’s appointment and going to a hospital can involve delays, long waiting periods, and inconveniences.

Companies such as Teladoc aim to make medical professional aid and advice more accessible through technology.

Teladoc enables users to receive various forms of care from a licensed medical professional over the phone, Web, or mobile device in minutes; however, most people do not possess their full medical record, so the depth and complexity of that care can be limited. The implementation of an EHR and HIT system, once fully operational and tested, would allow these electronic connections to medical professionals to be much more convenient, effective, and comprehensive.

Wearable health technologies such as the Fitbit and Apple Watch could soon incorporate new features to make portable health tracking more receptive to an individual’s personal health records and needs.

These fitness trackers lay the conceptual foundation for devices that can more accurately monitor and analyze the body, and represent gradual changes occurring in the structure of healthcare services and technologies.

Artificial intelligence (AI) makes its way into healthcare primarily through the outfitting of medical devices with algorithms to assist imaging analysis. Many medical professionals such as physicians and radiologists are trained to analyze x-rays, computed tomography scans (CT scans), magnetic resonance imaging (MRIs), ultrasounds, and other medical imaging reports. However, the use of the machine learning algorithms, like deep learning, allows for efficient and accurate technological assistance. Deep learn-

ing is a form of artificial intelligence consisting of algorithms that are taught to look for patterns in data. Companies such as GliaLab seek to improve the quality of healthcare universally using innovative technologies and AI. GliaLab develops deep learning algorithms and products that serve to augment, not replace, the capabilities of medical professionals. For example, the GliaLab Nazako CAD System is capable of predicting the early stages of breast cancer with the use of these advanced imaging analytics. Further progress comes with the growing implementation of machine learning into other aspects of the medical field like radiology. Smart Radiology, a German startup, is working to create x-ray reporting templates that are customizable to suit individual needs. Along with being tailorable, these templates will soon employ machine learning analytics to support the workflow of many radiologists reading reporting templates.

These innovations in medical imaging processes are likely to further expand accessibility to some forms of healthcare.

Although the integration of artificial intelligence and other new technologies will improve the quality and accessibility of healthcare, medical professionals are not likely to be replaced any time soon. The assistance provided by these imaging algorithms is not enough to remove the need for medical expertise and other humans qualities and problem solving capabilities. Additionally, governmental regulations and the exorbitant prices of medical data provide substantial constraints on the accuracy of these analytic tools. These limitations extend to all current forms of artificial intelligence; neural networks learn by looking for and recognizing patterns in data, so if access to data is limited, the algorithms are hindered in their ability to spot all inconsistencies. Once health records totally digitalize and gain widespread use, further technological advancement and innovation serve as the promising reform our current healthcare system needs.

CORNELL BUSINESS REVIEW | 9

Growing up around the family business, did you always know that you wanted to be a part of Pendleton?

Mort Bishop III an exclusive interview with

the Chairman and former CEO of Pendleton Woolen Mills

No, I didn’t. I worked for Pendleton since I was a young boy starting at age 4 with my grandfather and his secretary opening his mail and delivering his mail to the office. And I worked in our distribution center which was in our corporate office at the time straightening boxes as a young boy. Then I worked in our shipping facility shipping orders as a teenager and I worked at our mill doing time studies in our weave room. I worked at our wool warehouse moving raw wool around. I was kind of expected by my family to work in the business. And then I went through the rebellious stages and spent a summer driving a wheat truck in eastern Washington and a summer working at Baskin Robbins serving ice cream. I did some other things as well when I was at Cornell; I spent a summer in Kentucky working for the Presbyterian Church.The best job I ever had was working at Pendleton’s Disneyland store in California with my Cornell roommate and I thought I’d gone to heaven. So, to answer your question it was an expectation to work for the family business. I went through rebellious stages and did some other things.

When I was a senior at Cornell, I talked to my father about coming to work for Pendleton and we had a disagreement and he said I was on my own. So, I went through the recruiting process through Cornell career services, worked in New York for Lord & Taylor and I met my future wife there through the executive training program and then moved over to Bloomingdales and worked for Bloomingdales in New York, New Jersey and Washington DC. Eventually, I came back to Oregon and worked for Pendleton. Really, that disagreement that I had with my father was tough love and was the best thing that could have happened for me to have that outside experience.

And today at Pendleton we do have a guideline that anyone in the sixth generation that is interested in joining the company needs to spend 5 years outside the company in related business.

Actually, the next generation is having so much fun doing what they’re doing, maybe we won’t attract the talent that we need in the sixth generation. But my daughter, who is a Cornell graduate,

just joined the company last September.

She’s the first of the sixth generation!

How has your Cornell experience impacted you as a businessman, leader, and person overall?

Cornell exposed me to so many opportunities and so many different varieties of business and interests, and a lot of talent among the students and alums at Cornell. All this Cornell experience inspires me to do more, and to be better. Visiting Ithaca as an alum is always energizing.

I come away from a visit to Ithaca with new thoughts, new ideas, and various things that I see on campus in classes or workshops, or alumni gatherings, meeting with smart and innovative people. It all comes together and rubs off on me in a positive way. It’s a long trip from Oregon to Ithaca, and there’s a poem, “ The Road to Ithaca” and I think of that often on the journey to Ithaca. It is indeed a journey. We need to keep the destination in mind. I tell our prospective students in Ortegon that the road to Ithaca is difficult and challenging, but Ithaca is this place somewhere over the rainbow that will greet you with a bag of riches.

At Pendleton, we are known for classic products - for home, apparel and accessories, which is a great foundation to have. We move out from there to interpret trends that are appropriate for Pendleton. We do need to move with the trends, and create excitement for our customers.

You were recently recognized for your long-term service to Cornell with the Frank H. T. Rhodes Exemplary Alumni Service Award. What aspects of your service to the Cornell community have been the most meaningful or rewarding for you, and why?

Every year about thirty students receive an award from our Cornell Club of Oregon scholarship that frees them of graduating with debt. I feel that that is the most gratifying legacy that I’ve been involved in. I should say that when you become my age, you realize that the most important thing in life is passing it on to the next generation and the Cornell Club of Oregon scholarship does just that. It changes lives for the next generation and the money that we have raised

comes from alums who were affected in a positive way by scholarships that they received from Cornell. We call this the Cornell tradition, and passing it on to another generation is something really beautiful and meaningful. We send a letter to the recipients of the scholarship and mention that someday in the future we hope that they will have the same opportunity to pass the Cornell tradition onto yet another generation.

I would also say that what has been so rewarding for me is the friends that I have met through my alumni activities.

I have met so many outstanding people and I have made very rich friendships through working with various alumni and trustee activities and in interacting with both the faculty, administration and fellow alums. It’s wonderful to have maintained friendships with my closest friends who I knew at Cornell, and even though we are 3,000 miles away, we make time for each other. It is obviously very rewarding to have friends that one can count on in life.

Given your experience as a lifelong Cornellian and former trustee, what advice would you offer to the class of 2019 as they graduate in the spring?

Always keep Cornell in your mind.

Cornell is not a four year experience - it is a lifetime experience.

What was the most challenging aspect of your role as CEO and President of the Pendleton brand?

I would say adjusting the leadership tempo to good times and to bad times.

Economically, when you’re in a good business cycle, you’re a certain kind of leader and in a more difficult business cycle, your leadership style differs. Leadership tempo is an art form and very subjective, very necessary and important.

What citing

has been the most exaspect of your role?

Working with products. I realize how fortunate I am to work for a product company and products that I can take pride in, personal pride. I see most of my friends out there in the world working with paper and email whether they’re in law or in finance. They don’t

have the same pride that I do that revolves around product.

I feel very fortunate to have worked my whole career with product. Also working for a family business is very gratifying in that a family business is really a sustainable business that you want to pass on and we have the luxury of having shareholders who are like-minded and are less concerned about our quarterly numbers while being more focused in our multi-year goals, taking a longer term approach. That’s how we’ve accomplished being in business for six generations.

Now we are going to ask you about 5 of your “ favorites.”

To get started, what is your favorite Pendleton product?

Well it depends on what day it is! Right now I’m looking at my office and I have a beautiful Pendleton Tommy Bahama print shirt. I have some friends who are going to Hawaii for Thanksgiving and I’m giving one of these incredible shirts to each of my friends. We are in a collaboration with Tommy Bahama, who is known for novelties, and we are known for novelties. This print is a combination of some of our Native American iconic symbols, and some of Tommy Bahama’s iconic floral symbols.

The collaboration is a fun, exciting take on product. While we have fresh new products, you can never go wrong with the traditional Pendleton classics. For instance, for our home product line, the Chief Joseph Blanket is one of our original products. It is still our best seller today after 100- some years being in our line. The Chief Joseph Blanket- one size fits all, and it is not a seasonal product. It is not perishable- it is always a beautiful product, whatever time of year it is and it is heirloom quality.

What is your favorite book?

Right now I am reading a fascinating book, The Oregon Trail

by Parkman, copyright 1872. It is about someone who went on the Oregon Trail and lived with Native American tribes. I find the style so descriptive, and these impressions of living with Native Americans during the 1840’s compared to my impressions really fascinating. I can’t seem to put it down. Boys in the Boat… I rowed crew at Cornell. That was also a wonderful read.

What is your favorite Cornell memory?

My favorite Cornell memory is actually Senior Week. I felt like I really developed an appreciation for upstate NY. SO many Cornellians are Ithaca-centric. No one has the opportunity to really touch the incredible beauty of the Finger Lake region. Senior week- going to the different lakes- to the different wineries and seeing beautiful upstate NY was a real treat for me, and is something I have rekindled many times since. Cornell does a great job with Senior Week. They publish the 150 things you need to do before you graduate, so it really encourages kids to get out of their comfort zone and experience the unique defining features of Cornell - whether it is milking a cow in the dairy barn or shaking the president’s hand, or just crazy fun things that every student needs to do.

What is your favorite place on campus?

I would say the gorges – Fall Creek or Cascadilla Gorge – where one can breathe deeply and take a rest from the academic rigor. It kind of puts life in perspective when you’re able to walk through the gorges on campus. Depending on the weather and how the mist rises from the falls, it changes every day. It can put you in a whole other world.

Who is your favorite leader?

Well, I would go back to our earlier conversation and say Frank Rhodes. He was an exemplary leader at Cornell, what he was able to accomplish being the longest serving Ivy League President of his day. It is so challenging to bring faculty, students, alums together, and move forward in a positive, innovative way. His ability to articulate vision, create consensus was extraordinary. He really was a pillar in the leadership world. I would also say my father was really a great leader. He knew when to knee me in the rear, and then put his arm around my shoulder - tough love. He worked for his father too so he knew how it felt to work in a family business. I learned a lot in a very personal way from my father. His Indian name was “Just Good-Doer of Things” and he really lived up to that.

As sustainable business has become top of mind for many industries over time, how has Pendleton taken steps to “go green”?

In weaving fabric today and the wastewater aspects of being a manufacturer in America, keeping ahead of the requirements is critically important. As far as our packaging, we strive to “the natural step” of doing what we can to create a more positive environment. The use of wool, which is nature’s original sustainable fiber, is not man made. It’s made by mother nature. Going back in time, the dyes that have been available have not been sustainable. We have come a long way. Right now, I would say 75% of our colorations are sustainable and my cousin who is our mill manager has worked very closely with chemical suppliers and we have been a beta site for them to create sustainable dyes. I would say in my lifetime, all of the dyes will be sustainable, which is very exciting. Certainly the wool fiber is sustainable and if we can create sustainable dyes, that would be an incredible milestone.

Having transitioned from CEO and President to your current role: Chairman of the Board, where do you hope to see Pendleton going in the future?

Our future will be accelerated and enhanced by taking a multi business channel approach. We have worked hard to create a foundation of different businesses: men’s, women’s, home product, accessories, retail, catalog, internet, wholesale business - selling our products to other companies. In the business cycles we go through in the apparel and home industry, if women’s wear is off, we devote more of our resources to men’s and home. It’s really important to have a balance of our businesses.

I am a real proponent of making sure that we have all of our channels working together to maximize the trending business

TECHNOLOGY

HPC: The Unsung Hero of Modern Computing

By Matthew Peroni

I

n August of 2017, OpenAI, a non-profit artificial intelligence research company founded by Elon Musk, developed a bot that beat professional E-Sports players at Dota 2, a multiplayer online battle arena video game. The bot, an automated program that, in this case, plays a video game, was able to defeat very skilled, human players. The game is considered quite challenging, and many players were impressed by the computer bot’s abilities. Ever since Google’s Alpha Go beat a professional Go player, stories like this seem rather commonplace, and the mysterious powers of artificial intelligence (AI) only continue to grow in the public eye. However, critics of the OpenAI program quickly noted that, in creating this program, nothing particularly new or interesting was developed in the scope of artificial intelligence. That is, OpenAI built a bot by using algorithms and methods that have existed for over 30 years. In fact, most AI tools covered in various forms of media are based off of ideas that have been around for decades. Why, then, has it taken the tech community so long to make these programs?

The underwhelming answer is insufficient computing power. To successfully train the program used to beat professional Dota 2 players, OpenAI had to work with a dataset of 5.8 million games. The computer, of course, does not have any knowledge of how to play the game, so training such a program meant the computer had to virtually “play” each of the 5.8 million games to figure out the best strategies and moves to make at any point in a game. Prior to recent advances in high performance computing, computer scientists knew how to create such a program, but they simply did not have the computing power to see it brought to life.

High Performance Computing (HPC) is at the core of many problems that computer scientists currently face. HPC is a rather vague term, but it can best be described as the technology developed to increase the speed of computation through improvements in both hardware and software. Over the years, HPC has taken on different forms and areas of HPC research have shifted. The effects of HPC are evident, as computers have gotten smaller and faster, but designing transistors is only part of the story. To really drive efficiency, changes must also be made at the software level. This combination of forces is perhaps

less flashy than other areas of computer science and engineering research, but it has allowed the industry to achieve things that would otherwise be impossible.

For perspective, the term artificial intelligence was first coined by John McCarthy in 1956 when he held the first academic conference on the subject. Since then, AI has made fairly subtle advances that are outside the scope of what the public may consider to be ‘true’ artificial intelligence. Slight improvements here and there in search algorithms, machine learning algorithms, and statistical analysis characterize the majority of AI research over the past few decades. This led to the “AI Effect,” or the downfall of AI research in the mid 80’s due to expectations far outpacing performance. HPC has made major progress in its abilities in the last decade, saving this area of research in the process. The algorithms did not get better magically, rather, the computers they were running on got faster. In that way, HPC is the limiting factor, or, optimistically, the frontier, in spaces such as AI that have high potential for impact in industry and for humanity, at large.

Until recently, HPC has been primarily concerned with making computers faster through improvements in hardware. This emphasis on hardware was largely driven by Moore’s Law, a term which originated around 1970 stating that processor speeds, or overall processing power for computers, will double every two years. However, in recent years, this trend has not held true. Reducing the size of processors is now a topic of nanotechnology, and the future for this sort of innovation is uncertain. Two avenues currently exist to improve the speed of computers - either build larger computers with more processing capability, or improve the software. Both approaches have been utilized recently in academia and industry, and the impact is ubiquitous.

Working with supercomputers can be a tedious and costly process. For that reason, industry, from finance to biotechnology, has turned to parallel computing to analyze and manipulate large datasets as quickly as possible. The idea of parallel computing is that, for computers with multiple processors, software can be designed so that the computer can split up a task into smaller pieces and solve each piece at the same time, in parallel, and then combine the solutions to each smaller problem quickly at the end. While the design principle CORNELL BUSINESS REVIEW | 13

TECHNOLOGY

TECHNOLOGY

does not work for all tasks, there is a substantial set of programs that lend themselves to the methodology. Further, the process does not work without multiple processors, which implicitly ties this software development to hardware improvements. The standard modern laptop already has two to four processors, so almost anyone can utilize this technology without the need for some supercomputer.

For example, BlackRock, the world’s largest asset manager with $5.1 trillion under management, built its trademark Aladdin platform using the Julia programming language, the fastest modern high performance open source computing language for data and analytics.

Julia gives the developer “three levels of parallelism” with which to work. This allows for key functions in the operating system, such as risk analysis and trade execution, to be completed and updated as quickly as possible. The decision to commit to this technology has paid off for BlackRock, as Aladdin has grown from an internal risk analysis tool to an operating system utilized by over 85 asset managers and institutional investors worldwide, involved in over 250,000 trades daily, representing over $20 trillion in funds. Of course, BlackRock faces serious competition from other financial technology firms, driving the company to invest in fundamental computer science research and development. Specifically, speed is the key, and while executing the best trades as fast as possible keeps BlackRock’s Aladdin above the competition in fintech, the underlying technology has diverse applications reaching as far as novel drug development.

Biotech is a hot and volatile industry, but HPC may begin to provide more certainty to the viability of 14 | CORNELL BUSINESS REVIEW

developing products and services in this sector. Biology is complicated, and the biochemical interactions that occur just within a single cell are almost impossible to track.

Trying to accurately model and simulate all of the reactions that occur within a drug delivery system, then, really pushes the boundaries of current capabilities. Therefore, scientists resort to tedious lab and clinical trials that must be carefully controlled and regulated. This creates a difficult situation for investors in biotech, who must believe in a product based on papers that often hypothesize what should happen, even though the biochemical system under consideration is far too complex to determine its behavior definitively. Systems biologists, who study biological systems as networks that can be mathematically modeled, have been working to integrate HPC into biotech to handle some of these large biochemical systems which have been impossible to accurately model for decades.

Models of physical systems are becoming so comprehensive and accurate that the nickname “digital twin” has emerged to emphasize just how close these models are to mirroring reality. Many companies, such as Genentech, a leading biotechnology firm specializing in drug discovery and development, have felt a very real impact on their work due to these computer models. For computational scientists at Genentech, the kind of computer simulations necessary to accurately capture the behavior of the drug development process often take multiple weeks to complete. The role of these scientists is, in part, to inform lab scientists, who work directly with the biological material, about the best direction to take their lab work. This is a tricky job, then, when it requires weeks to be able to pro-

vide any kind of input. That is why Genentech recently provided their computational scientists with ten thousand cores, or processors, courtesy of Amazon’s hardware, coupled with CycleCloud, the software force behind Cycle Computing’s HPC cloud service. The topic of cloud computing could be an entirely separate article, but the end result of this effort reduces the running time of most simulations at Genentech from two weeks to eight hours. Multiple scientists commented that this upgrade has “sped research along and allowed for more streamlined, efficient use of (each) team’s time.”

Supercomputers are advancing certain areas of industries, such as developing fast and accurate simulations in biotech, but at a very high cost. That is, the computers themselves are large and expensive, and often must be designed for specific tasks. Parallel computing and other forms of developing HPC software, however, are much more affordable once created and can often be applied to many different problems across industries. The effectiveness of parallel computing is partly dependent on the horsepower of the computer on which it is used, but hardware has also demonstrated limits in this area. Therefore, it makes sense that tasks which can be parallelized are likely to be in the near future, and this could have significant effects on everything from the efficiency of markets to the quality and volatility of biotech products.

The finer points of HPC aside, highly effective tools such as artificial intelligence and computational modeling are becoming faster and more feasible.

As these computer artifacts become faster, they also broaden the scope of their functionality. This will likely have a large impact in engineering work, which can now rely more heavily on simulations with the capacity to test 1000 designs in a few hours rather than experimental results that take weeks to set up and validate.

Companies like Genentech already feel the impact of this technology, and it is very possible that accurate simulations will replace some of the guesswork involved in developing novel biological systems, driving down the volatility of biotech. In other areas, such as finance, HPC is making asset management easier and more efficient, although there are some serious concerns about one operating system, such as Aladdin, being responsible for the management of trillions of dollars - any small bug in the system could have massive effects on markets worldwide. Regardless, the fancy buzzwords, such as artificial intelligence and machine learning, merely scrape the surface of the current technological revolution. Speed is the key, and we may be reaching escape velocity, the point at which all of the algorithms and ideas generated since the 1960s are suddenly feasible and the computer models of the real world become almost indistinguishable from reality.

“Regardless, the fancy buzzwords, such as artificial intelligence and machine learning, merely scrape the surface of the current technological revolution. Speed is the key, and we may be reaching escape velocity...”

CORNELL BUSINESS REVIEW | 15

FEATURE ARTICLE

FEATURE ARTICLE powerful voice of the average consumer. Habits of younger demographics are more unpredictable in the sense that teens and young adults often quickly arrive to conclusions about their perceptions of companies, whether positive or negative.

This can result in consequences for executives with calculated or less reactive management styles. For example, an ad-

The constant stream of technology and social media in decades to come will determine which companies and their CEOs are best-equipped to handle the demands of the 21st century.

The 21st Century Executive

By Steven Romero

I

f you were to open up Twitter on your phone at any given hour, there is a very real chance that a tweet from Tesla CEO Elon Musk could appear on your feed. This is no exaggeration of Musk’s rampant social media habits. The Wall Street Journal compiled data about Musk’s twitter history from when he joined the platform up until June of 2018; only one other CEO (Mark Benioff of SalesForce) tweeted more than Musk, as Musk uses Twitter to promote products, reply to consumers, blast his critics, and much more. One tweet from Musk on April 1, 2018, which came after one of Tesla’s worst performing months on record, joked that Tesla had fallen into complete bankruptcy. The message was not so well-received by company investors, and Tesla shares fell by 7% that day; simply put, the CEO’s poorly timed joke caused a very tangible decrease in the company’s overall value.

16 | CORNELL BUSINESS REVIEW

In the ever-connected modern world, CEOs are expected to address a wide range of concerns from the people who pay money to use their goods or services. Consumers of today care more than ever about social issues. A piece from The Guardian about the rise of the “conscious consumer” demonstrated how customers are willing to put their money where their mouth is; the article stated that “A study from YouGov and the Global Poverty Project revealed that 74% of those surveyed would pay an extra 5% for their clothes if there was a guarantee workers were being paid fairly and working in safe conditions.” Even more impressive, the report went on to say that 125 million people would be lifted out of poverty if the fashion industry put just 1% of profits towards workers’ wages.

This changing landscape highlights what bosses say and do, and everyday consumers are becoming

more proactive in their expectations of companies. The public backlash could be harsh and swift for companies and CEOs unable to meet consumer standards. As evidenced by both Elon Musk’s most savvy tweets and detrimental statements, social media is an enormous factor in the changing relationship between corporations and the average American.

Yet, today’s CEOs cannot only focus on the general public. The dynamic between head executives and shareholders is also rapidly shifting, largely due to technology. A 2017 report by McKinsey & Company discusses some of the ways that the antiquated model of management is clashing with the needs of modern-day consumers.

Many board members are comprised of individuals with long-term experiences. As such, they often find it difficult to work with the CEO to adapt to social media and the increasingly

vertisement running in the Super Bowl that unintentionally offends an audience can grow exponentially worse if that company does not immediately remove it and offer sincere apologies. Consumers exhibit decreasing amounts of patience with large firms, especially concerning relevant social matters. If a CEO and board are unable to maintain credibility with their buyers, the potential for a big blunder becomes imminent. It is clear that the entire team of executives at a company must constantly adapt to the needs of consumers, especially younger populations, as new technology allows anyone to speak their mind more freely and quickly than ever before.

Social media can be a powerful tool in the corporate world, but it can also be a deadly weapon. America’s highly politicized climate has far-reaching effects on major corporations. With strong activism on both sides of hot-button issues, companies are expected not only to take a side, but to take the “right” side. While some social media campaigns successfully tap into relevant movements and ideas, other ill-advised efforts can cast an entire brand in a negative light indefinitely. In one of the most scrutinized company failures in recent years, Pepsi ran an advertisement that alienated an enormous demographic: supporters of the Black Lives Matter social movement. The ad began with a large crowd of young people marching on the streets for an unnamed cause, and it comes to a head when the crowd confronts a wall of law enforcement. There is a pause, then the ad ends with celebrity model Kendall Jenner seemingly diffusing the tension by simply handing one of the officers a Pepsi. While consumers expect to see companies representing their beliefs, they are unforgiving when a brand trivializes an incredibly complex social issue to promote a product.

On the other hand, successful social media campaigns can give companies a boost that a one-page print magazine advertisement just cannot offer. CEOs and upper level management receive endless praise when they successfully capitalize on a trend or use social media effectively. One noteworthy example comes from Pepsi’s biggest competitor, Coca-Cola. As mentioned earlier, one of the biggest consumer demands involves greater voice and subsequent responsiveness from companies. The personalization of Coke cans in their “Share a Coke” campaign, debuted in 2011, tapped into that desire exceptionally well by putting first names, nicknames, and other titles on their cans and bottles. It was particularly effective because consumers felt a greater personal connection with the company to see their names included on products, as opposed to the uniform design. This campaign brought together people from around the world who purchase Coca-Cola, and the campaign began to spread quickly on platforms like Twitter, Facebook, and Instagram. The Share a Coke promotion reversed a downward trend for the brand by boosting total sales by 2.5%. Although currently phased out, the promotion is rumored to return in future summers.

CEOs and management must toe the line carefully when it comes to engaging with consumers. Overstepping boundaries risks alienation, while overly safe approaches can leave companies irrelevant. In the same way that a bad experience triggers consumer discussion more so than a good experience, large corporate missteps can damage reputations and hurt brand favorability indefinitely.

Changing technologies pose even greater challenges for companies. The rise of automation in the workplace will challenge leaders to delegate duties more efficiently, forcing them to consider both how their company functions internally and externally in the public eye. A good reputation in the modern world begins from the inside. Amazon CEO Jeff Bezos has been generally consistent about avoiding mistakes, but stories about unfavorable workplace conditions have caused some customers to voice serious concerns. Amazon responded to negative reports by removing a corporate system that set strict “point” targets for employee productivity; nonetheless, the underlying reputation of their workplace environment will be harder to shake. Growing concerns about employee treatment and fair wages suggest that CEOS will continue to be pressed by consumers to improve and maintain proper working conditions.

Technology and social media will continue to determine how companies construct their public image and make decisions. The CEO must act as a mediator between the demands of shareholders and the collectively powerful voices of consumers. Bosses like Elon Musk, who stay very active on social media by posting frequent thoughts and updates, see higher levels of consumer engagement, for better or for worse. Public expectations are constantly changing along with political, social, and moral sentiments of the time.

Consumers have the ability to react and speak their minds more quickly than a traditional company’s chain of management can process information. The constant stream of technology and growth of social media in the decades to come will determine which companies and their CEOs are bestequipped to handle the demands of 21st century consumers.

CORNELL BUSINESS REVIEW | 17

INDUSTRY

INDUSTRY

Why

BEHAVIORAL ECONOMICS

matters

By William Wang

A

vid basketball fans will be familiar with the idea of a “hot hand.” As the game unfolds, a player who sinks shot after consecutive shot will seem unable to miss. As roaring crowds egg them on, announcers declare that the player’s streak is essentially unbreakable. They have “hot hands,” an inexplicable intuition for making baskets.

Since they made every prior shot, how could they miss now?

This, of course, is a fallacy. Basketball shots are independent events, and the outcomes of previous baskets do not affect subsequent baskets. But this insight is far from mundane. It shows how human psychology can distort rational thinking. It also opens the doors to behavioral economics, a school of thought that has grown increasingly influential in business, policy, and academic circles.

Firms are now incorporating behavioral insights analogous to the “hot hand fallacy” into their business models. Policy thinkers are worrying about how psychology can influence financial panics. And academics are dreaming up new ways to think about the intersection of psychology and economics. So to understand these emerging trends, one must first understand the burgeoning field of behavioral economics.

Studies in behavioral economics apply psychological insights to economic findings, attempting to explain why economic theories may not actually hold in practice. Behavioral economics recognizes that human beings can act irrationally and may not always behave in their own best interest. A lack of information, the influence of emotions, bias, and social pressures all contribute. These human irrationalities lead to inefficient markets, and inefficient markets mean that the price of a company’s stock may not fully reflect the information available, for example. Thus, an investor is able to scoop up a stock that is undervalued based on an insight into overlooked information, and receive an excess return.

The origins of the field are traced back to the work of two Israeli psychologists, Daniel Kahneman and Amos Tversky. The pair’s studies of the irrationality of the human mind in the 1970s laid the groundwork for behavioral economics as a field. Through their research, they determined that people often do not completely analyze situations when making decisions; humans are susceptible to how a situation is framed.

18 | CORNELL BUSINESS REVIEW

Kahneman and Tversky’s research has practical business applications. Consider an investor who is presented with the same mutual funds in two different ways. In one case, the fund is presented with an annual average return of 12% over the past 4 years. In the other case, the fund is pitched as having above average returns over the past 10 years, but declining in recent years. According to Kahneman and Tversky’s findings indicating a human inclination to avoid potential losses, the investor is more likely to purchase the fund based on the first pitch.

In a similar experiment, Kahneman and Tversky gave participants a choice between a procedure that could potentially save 80% of patient lives or a procedure that could potentially kill 20% of its subjects. Participants almost always chose the former, despite the scenario implying the same risk probability in both cases. Risk aversion and framing bias work together to influence human behavior in both business and non-business settings.

Kahneman and Tversky laid the groundwork for behavioral economics with their research in irrationality in human decision-making. However, it was economist Richard Thaler who brought the field into mainstream economics. After reading the work of Kahneman and Tversky, Thaler was inspired to pursue work in the field; in the 1980s, he began expanding on their research, despite general disapproval from his academic peers. Today, Thaler is considered the father of modern behavioral economics.

Thaler focused heavily on the “endowment effect,” which posits that people value their own possessions more than they value possessions over which they

have no ownership. Companies who offer customers free trials of a product or service take advantage of the endowment effect. Providing a free trial allows potential customers to avoid the initial risk of paying for a product that they might come to dislike, alleviating the initial risk associated with ownership. Then, once a customer uses the product for a short trial period, they are more likely to develop feelings of ownership and, as a result, value the item more than they might have previously. From a business perspective, free trials coupled with the endowment effect promotes eventual purchases.

Thaler also used the concept of “confirmation bias” throughout his work, which states that humans seek out information that aligns with their preconceived notions. Consider left- or right-leaning media outlets.The angle any given media outlet takes in covering a story is designed to appeal directly to its viewers’ confirmation biases. Individuals tend to watch the news networks and read the newspapers that align with their own political views because doing so allows them to validate their personal beliefs.

Additionally, Thaler researched “hindsight bias”, which explains that people often believe they predicted an event before it really occurred. After the 2001 dot-com crash and the 2008 recession, pundits looked back at events that were relatively innocuous at the time, and afterwards claimed their predictability in relation to the crashes.

Behavioral economics is not without its detractors, however. Eugene Fama, the founder of the efficient market hypothesis, is a leading critic. In his seminal 1988 paper, “Market Efficiency, Long-Term Returns and Behavioral Finance,” Fama argues that behavioral finance (and by extension, behavioral economics) is a collection of random, short-term anomalies that would be smoothed out in the long run. Essentially, Fama argues that behavioral economics is nothing more than a study of white noise.

Others criticize behavioral economics for an overly narrow focus on individual behavior. Much of the field focuses on how the individual makes decisions, and how those decisions are distorted by cognitive biases and false perceptions.

But this approach risks ignoring reality. Much of consumer and investment decision-making depends on how individuals

“Behavioral economics recognizes that human beings can act irrationally and may not always behave in their own best interest.

A lack of information, the influence of emotions, bias, and social pressures all contribute.”

- Amos Tversky & Daniel Kahneman

act in a larger group context; individuals are influenced by the people around them. Behavioral economics does not account for this dimension, limiting the reach and impact of the field.

Nonetheless, in recent years, behavioral economics has gained credibility thanks to its practical applications. Consider the 2008 financial crisis, perhaps the moment that behavioral economics gained mainstream recognition. Some of the players most blamed for the crisis gave rise to the sudden usefulness of the field.

Alan Greenspan, the chairman of the Federal Reserve at that time, received blame for the crash due to his over-dependence on the theory that markets are almost perfectly efficient. In a congressional testimony, Greenspan expressed surprise that markets did not respond rationally. He was a believer in laissez faire policy — let financial institutions regulate themselves, because their best interests align with the best interests of the economy. However, markets did not prove totally efficient, indicating that something else was at play.

Another example of the growing prominence of behavioral economics involves Richard Fuld, former CEO of Lehman Brothers.

Fuld guided Lehman Brothers through multiple crises in his 14-year tenure, and he believed that the 2008 crisis was nothing more than passing troubles that could be powered through. Up until this point, Fuld had not faced a quarterly loss as CEO of Lehman; this was a prime example of the hot hand fallacy discussed earlier. Fuld avoided losses for his entire tenure before the crash, and he expected that success would continue as a result of his past success. This misguided belief doomed Lehman to bankruptcy at the height of the collapse.

In the aftermath of the crisis, it becomes more apparent that traditional economic theory is not enough to explain the behavior of the market and consumer decisions. Behavioral economics and its practical applications are increasingly accepted in the post-recession era. Growing acceptance for behavioral economics can be seen through the increased use of “nudging” in corporate strategy, or the idea that people perform differently based on changes to the context in which they make decisions.

Companies such as Uber use nudging to maximize performance; when a driver is about to log off, Uber sends them alerts of customers nearby, encouraging them to continue driving due to this added convenience. This feature helps Uber’s operations run more smoothly and increases the number of customers served on a daily basis. Nudging extends even as far as the airline industry, where airlines send prompt feedback to pilots to ensure that they flew in a fuel-efficient way, lowering costs and shortening travel times for the company and its customers.

While it’s clear that behavioral economics is becoming more useful and accepted in the modern corporate world, it behooves behavioral economists to focus more on social group behavior and its effect on economic decisions. There are still many unanswered questions: how do individual biases and irrationalities influence how people interact with each other? Further, how does this affect consumer and corporate decision-making? As the field grows in its influence, gaining a clearer understanding of its impact is crucial. Humans are the greatest variable in today’s business economy. Without a proper understanding of social groups and the irrationalities behind their interactions, the business world might continue to struggle with evaluating and adapting strategy decisions.

CORNELL BUSINESS REVIEW | 19

INDUSTRY

INDUSTRY

“One of the biggest problems facing the Midwest in recent years has been the inclination of younger generations to leave for the coasts. With the interconnectivity of today’s society, young adults see the appeal of city life and the business that comes with it.”

Selective Urbanization T

By Aaron Buchwald

oday’s labor market offers more mobility than perhaps any generation before it. This mobility allows people to experience different cities throughout their lives, expand their social and professional networks, and enjoy a new level of freedom. But it’s also creating a problem. People, to a great extent, are making similar choices: they are leaving rural areas and often moving to big cities. According to Grayline Group, today’s highly specialized economy is pulling more and more of the most talented students from across the country towards centers of industry like San Francisco for tech and New York for finance. Meanwhile, the growing presence of mega farms appears to be putting an end to smaller family farms. Agricultural jobs in the Midwest are disappearing with no sign of replacement. In 1862, the Homestead Act convinced millions of Americans to caravan out to the Midwest in hopes of starting a better life. Now, it looks like this trend may come full circle as mega farms push younger generations out of the Midwest, and into already crowded, coastal cities.

As farm equipment improves, the need for human labor declines quickly and substantially. Only a century ago, it required the effort of an entire family to manage a single, one-hundred-sixty acre homestead. Today, a single farmer can cultivate thousands of acres of land alone. As the demand for human labor falls, the result is fewer opportunities for young people to join the agricultural labor force. Moreover, there are fewer young people taking jobs in agriculture and the Midwest is fighting an uphill battle to recruit their own best and brightest. This trend

20 | CORNELL BUSINESS REVIEW

has already impacted the economy and culture in the Midwest, and it stands to play a defining role for the future of agriculture.

With a decreasing labor demand, fewer people are able or willing to follow their parents into the farming profession, and younger generations are increasingly looking for job opportunities elsewhere. Freshman Evan Byers from Andover, Kansas explains, “One of the biggest problems facing the Midwest in recent years has been the inclination of younger generations to leave for the coasts. With the interconnectivity of today’s society, young adults see the appeal of city life and the business that comes with it.” The changing nature of agriculture produces tangible, cultural impacts on people’s lives. College-age people are aware of their options, and the reality is that one of the most attractive options for adolescents is simply leaving.

The uphill battle involves more than just the great opportunities on the coasts; the disappearing available opportunities to run independent farm businesses pushes people to look elsewhere. Larger farms require more land than ever before and so-called mega farms now and the USDA Economic Research Service states that large farms account for 90% of total US agricultural production. However, mega farms fail to offer nearly as many jobs as the small ones which they have replaced. Large farms are simply outcompeting the smaller ones by achieving economies of scale and investing more resources into capital-intensive production methods and technology. Many use drones to monitor bacteria or soil moisture,

and increasingly rely on automation to run their operations.

Larger farms even compete directly over farmland owned by third parties. For some absent landowners, large farmers can offer a generous solution for their unused land. The Wall Street Journal reports that mega farms often offer flat rates to rent out farmland, whereas smaller farms might not have the necessary financial stability, so they offer sometimes less attractive profit sharing agreements instead. At every corner, large farms are making it harder than ever to successfully run small farms.

What do these changes mean for people considering starting their own farms? Higher startup costs act as barriers to entry and are a substantial roadblock to many wouldbe self-starters. The landscape has changed drastically since migrants poured into the Midwest to claim their free homesteads during the 19th century. Now, the opposite occurs, as younger generations want, and are able, to leave the Midwest, threatening to cause a serious talent drain from the area.

This trend is deeper than millenials simply moving to the coasts for job opportunities. It reflects a broader trend of urbanization nationwide. Young people are, by and large, choosing to move to cities. If you talk to current college students about their summer plans, you probably will not find many discussing their dream internships in Des Moines or Portland. College students are increasingly excited about the prospects of spending summers in NYC or Chicago for finance, Washington D.C. for politics, or San Francisco for tech.

The trend also goes beyond just urbanization, it involves the concentration of people in the exact same cities. Areas like San Francisco, New York, and D.C. already face the negative effects of young people pouring in at increasing rates; overcrowding

has caused home prices and the cost of living to sky rocket.

In San Francisco, undoubtedly the worst case, a one bedroom apartment has a median price of $3,460 per month.

There are no signs of the trend slowing down. For big companies, their urban locations are a job perk that helps them attract the best talent. Google, headquartered in Mountain View in Silicon Valley, even organizes housing for many of its interns in order to ease the cost of living. In fact, job offers at top tech companies like Apple and Facebook are offering increasingly more benefits aside from wages that make residing in these expensive cities more feasible. In fact, Business Insider offered some of the details of the luxury lifestyle at Apple including high quality subsidized meals with sophisticated offerings like oysters for only $1.

Companies competing for top talent feel the pressure to provide compensation packages that offer luxury living at low costs. Even with elaborate compensation packages, it is hard for many corporations to forego one of the most important job perks: the city and the lifestyle that comes with it.

As long as mega farms continue to scale production without creating new jobs, the push out of these rural areas and into cities is likely to continue. How will this level of urbanization affect U.S. demographics? At some point, it stands to reason that the cost of living will get high enough in San Francisco and New York so that other cities start to absorb more of the influx.

Currently, there is a misconception that these trends are only local issues. San Francisco and New York, on the other hand, see the housing and transportation situations as being at emergency levels. Meanwhile, towns such as Hope, Kansas contend with 80% of their high school senior classes leaving after graduation, and post office hour reductions followed by closures. Although extreme examples, it is clear that these are national concerns. Affordable housing and improved transportation might make it possible for more people to live comfortably in crowded cities, but it only delays the real issue by promoting congregation into a select few cities.

Urbanization and overcrowding in a few popular cities justifies a nationwide plan of action. Local governments are overwhelmed with the consequences of the nationwide phenomenon, and neither overpopulated cities nor shrinking towns can address the individual causes. It is difficult for the federal government to respond meaningfully because every state actively lobbies for federal spending within its borders. One solution involves federal scholarships and tax incentives for people and companies willing to relocate or reside in less-populated areas; along with greater spending on infrastructure in overpopulated cities, these proposals could help alleviate serious traffic congestion, crowding, and astronomical rent prices. Politics within Congress too often boils down to a debate over which states receive more funding. On this nationwide issue, Congress needs to reach a compromise that actively addresses the causes of overcrowding, and works to promote opportunities across the country, from coast to coast, and the places in between.

CORNELL BUSINESS REVIEW | 21

INDUSTRY

INDUSTRY

Ithaca Should Take the Lead on Equitable Business Ownership

By Evan Shields

T

he most recent United States Census data listed 27,626,360 firms in the country. Of those ~27.6 million firms, around 9.8 million are owned by women and roughly 7.9 million by minorities; women own about 35.5% of privately held firms while minorities own around 28.8%. It should be noted that these statistics do not include overlap with businesses with female minority owners. The United States demographic is 39.3% minorities and 50.8% women, exhibiting that white men have an imbalanced grasp on business ownership. In Ithaca, the statistics become even worse. According to the U.S. Census’ most recent data on business ownership in Ithaca, out of 2,643 total firms, only 844 are owned by women, and an abysmal 384 are owned by minorities. Women comprise 49.6% of Ithaca’s population but only own 31.9% of businesses, and minorities represent 34.6% of Ithaca residents, yet own merely 14.5% of businesses. Note that the percentages of women and minority-owned businesses are lower than the national average.

People living in Ithaca may find these statistics surprising. Driving through downtown Ithaca, one can see rainbow flags in support of the LGBTQ+ community and “Black Lives Matter” posters in church windows, highlighting Ithaca’s general progressiveness compared to the otherwise rural and conservative area of upstate New York. The Commons give off a 1960s hippie culture vibe mixed with a town full of young intellectuals from the two colleges that comprise half of Ithaca’s population during the majority of the year. A couple who lived in Ithaca for over a decade referred to Ithaca as “the Berkeley of the east coast,” indicating how strongly the community feels about equity and progress.

So why is Ithaca struggling with equitable busi22 | CORNELL BUSINESS REVIEW

ness ownership? Moreover, how can the issue be resolved?

Speaking to local small business owners provides incredible insight into the struggles of women and minority businesses owners in Ithaca. Cornell F. Woodson, an African-American man, is the CEO of Brave Trainings, a social justice consulting firm whose mission is to use individuals’ unique identities to create social dialogues that lead to a more inclusive environment. Tal Cohen is the female Israeli owner of a Mediterranean catering business, Ba-Li Cravings. Woodson and Cohen have very different backgrounds; Woodson arrived in Ithaca initially to complete his degree from Ithaca College before returning to work at Cornell University, and Cohen came to Ithaca with her family while her then-husband was completing his postdoctoral residency at Cornell University.

Woodson started his company to promote “diversity and inclusion,” while Cohen started Ba-Li Cravings “to fill what [she] saw as a gap in food options.” Nonetheless, Woodson and Cohen faced similar challenges when starting businesses in Ithaca.

It is undeniable that in both Ithaca and the United States, white males own an inequitable share of businesses.

Cohen said, “As a general woman business owner, there aren’t many of us, especially Israelis.” She followed by saying, “Rev [Startup Works, a business incubator in Ithaca] started a program for women entrepreneurs called Passenger to Pilot. There were sixty businesses, and businesses like Kelly and mine were there. They realized there was big potential for women-owned businesses, but they shut down the program after two years to focus on helping startups at Cornell. I feel in general, people in Ithaca start programs for women business owners then stop. It’s like they see the potential, then for some sort of rea-

son, I don’t know, it just dissolves.”

It is unclear why Rev Startup Works abandoned its Passenger to Pilot: Empowering Women Entrepreneurs in Central New York project. The company never released an official statement regarding its cancelation of the project, and although their website still makes a clear effort to promote women in entrepreneurship, the dissolution of Passenger to Pilot is indicative of a larger problem regarding funding for women and minority-owned businesses. The United States government is able to offer contracts to help businesses grow, and recently, the government has been making a conscious effort to invest in women and minority-owned businesses. Since 2008, federal spending is up 44.3% for women-owned businesses and up 38.7% for minority-owned businesses. Still, this effort is not enough.

In both 2016 and 2017, the fifty largest federal contracts given to private firms were all awarded to businesses owned by white men. Both Rev Startup Works and the U.S. government both seem to realize the significance of business ownership equitability, yet neither organization is able to fully commit to promoting women and minority-owned businesses.

It is important to acknowledge that white men are privileged as the group with the most unobstructed paths to business ownership, and Woodson stated that, “one of the biggest challenges I have faced is learning how to actually run a business. There was so much I didn’t know and still don’t know. White people, particularly white men, usually have a head start in that area due to generational wealth and access to education.”

However, the concept of representation in business still provides promising first steps in the direction of equitable ownership. Ithaca could benefit from implementing programs in ele-

mentary schools to introduce children to the idea of business ownership at a young age. When female and minority children see business owners like Cohen and Woodson, they subconsciously begin to paint a mental picture of what business owners look like, allowing them to visualize themselves in the position of owner or CEO one day. Children in Ithaca live in a place with unequitable business ownership, which tends to promote the default image of a business owner as a white man. Many academic studies, such as those in Stuart Hall’s book Representation: Cultural Representation and Signifying Practices, and John H. Flavell’s piece “The Development of Children’s Knowledge About the Mind: From Cognitive Connections to Mental Representations,” have shown that representation has a meaningful impact on how people mentally shape their own identities; for children, a lack of representation could discourage even the thought of pursuing a career in entrepreneurship. Encouraging and providing platforms for women and minority owners of small business to share their stories with young children gives them validation that their dreams are achievable.

Both business owners believe that these problems can be solved, and they agree that achieving equitable business ownership should start with better representation. “What would be nice is organizations that continue to support to women businesses,” exclaimed Cohen, “like Rev did it, bringing women businesses together. When we work together, we promote each other. A lot of things are being done with talking about it, but there is not much being done to guarantee that there is representation.

Cornell University makes an effort to promote women businesses, but I think more could be done in Ithaca as a whole.”

Woodson is in full agreement with Co-

“I didn’t really choose Ithaca, it’s just where I currently live. I work full time at Cornell University, so that’s what brought me back to the Ithaca area.

- Cornell Woodson, Brave Trainings CEO

hen, stating that, “we need to create more funding opportunities to help underrepresented populations start their own businesses. We also need more educational opportunities to help those same groups learn what it means to start and run a business, and to help them develop the skills needed to be successful.”

Moreover, some local governments, like that of the City of Oakland, California, attempt to help market for owners who are underrepresented in their industry. The Office of the Mayor in Oakland seeks to promote equitable business ownership through the potential creation of a pamphlet that lists sustainable local businesses, many of which are women or minority-owned.

The pamphlet organizes businesses by industry and provides relevant information including contact information and a short description of the work each business does. If the project is completed as scheduled, the City of Oakland plans to put the pamphlet on its website so it is easily accessible to residents and distribute physical copies to new business owners, encouraging them to shop locally while increasing ownership equitability.

It is crucial that Ithaca spearheads the drive towards equity in business ownership. Ithaca is a political dot of blue in the sea of red that is upstate New York, and it is unlikely that more rural towns in the surrounding area will attempt to increase economic equity in the near future. Moreover, as economic equity increases among various demographics, generational wealth and success does “For the first five and a half as well, indicating a possible decrease in the wealth gap between white and miyears [in Ithaca], I continued residents while also helping mimy job doing marketing in Israel. nority nority residents gain access to additional After those five and a half years, resources and stronger schools. ThereI decided I was done and wanted fore, economic equity can limit the disadvantages minorities often inherently face, to follow my passion.” which allows white students and minori- Tal Cohen, owner of Ba-Li ty students to begin from more equitable Cravings starting points. Ithaca’s progressive views are unique in upstate New York, and if Ithaca does not attempt to increase equitable business ownership, no one will.

CORNELL BUSINESS REVIEW | 23

SUSTAINABILITY

SUSTAINABILITY

Vertical farming at AeroFarms, an innovative way of growing flavorful and healthy leafy greens

Startups Shaping the Sustainability Landscape C

By Karla Kim

limate change is one of the greatest challenges current and future generations face, indicating that there is a lot of opportunity for technological innovation, economic policy changes, and new market trends in environmental sustainability. Sustainability is not just about Earth Day and picking up litter – it is about completely changing the way we design and adapt our infrastructure, daily behaviors, and critical activities. In other words, sustainability is not an ancillary action we perform to feel good about nature. Instead, sustainability is the lens through which we architect and execute our most crucial processes in energy collection, transmission, and usage to power the everyday operations of the world. From this framework, a number of startups are driving the innovation and scalability in sustainable works while also challenging the traditional methods and corporate strategy seen in the current market.

First, there is a surge of startups in the clean energy collection and resource management space. Leading this industry is a German startup, Sonnen, which features smart metering, real time energy analytics and management, and

24 | CORNELL BUSINESS REVIEW

customer-specific electricity usage optimization, all through one of the world’s first transportable, intelligent lithium storage systems. However, Sonnen’s system can be applied beyond private, residential, and commercial use. In a strategic venture, Shell invested $71 million in May 2018, raising Sonnen’s total funding to date to approximately $180 million from energy giants such as GE and European venture capital firms. All of these investments are a converged effort to further Sonnen’s vision: a virtual battery pool that allows a smarter, integrated grid system. Essentially, Sonnen is disrupting traditional utility and electricity grid companies, which tend to be local monopolies, by focusing on an energy sharing system from solar energy collection and personal energy storage so that people are not solely reliant on the grid.

Sonnen is entering the U.S. market with “Sonnen City,” a virtual power plant generating 23 MWh for over 3,000 homes and equipped with lithium battery storage in Jasper, AZ. Sonnen demonstrates how startups are incorporating technological advancements with market maximization to scale widespread clean energy collection and management systems.

While startups like Sonnen utilize technology for resource management shifts, other startups use targeted technology to tackle current waste and environmental harm. The Ocean Cleanup, a nonprofit organization that raised over $30 million dollars, is backed by entrepreneurs including Peter Thiel and Marc Benioff and is the first and only plastic clean-up initiative of this scale. Using a 2,000-foot-long U-shaped floating pipeline, 3-meter-deep nets, and satellite tracking of collection boats, the Ocean Cleanup is aiming to capture and recycle all the plastic in the Great Pacific Garbage Patch. To illustrate the sheer magnitude of this task, imagine 1,800,000,000,000 (1.8 trillion) pieces of plastic accumulating in a vortex of ocean currents in the North Pacific Ocean, with more plastic being dumped by the minute. This is the Great Pacific Garbage Patch – an enormous gyre of plastic debris 3 times the size of Spain.

Despite facing such a colossal challenge, the Ocean Cleanup intends to clean up 50% of the Garbage Patch every 5 years, and recently finished its 1,300 mile journey out of San Francisco and into the Patch. If successful, the positive impacts of this venture will be huge: trillions of plastic waste out of the ocean, healthier marine ecosystems, and more productive recycling.

Not only is it important to protect the ocean, preserving land through innovative agricultural practices is also gaining attention. Using a proprietary cloth and nutrient packed formulas, Aerofarms employs an air canal system called aeroponics in order to grow plants with more environmentally friendly methods. Aerofarms uses 95% less water than traditional practices and claims to be 400 times more productive than conventional farms. Pioneered by Cornell Professor Ed Hardwood, Aerofarms aims to solve the projected 70% increase in food production needs by 2050 and the crowding of agriculture land. Aerofarms is introducing a soil-less process of growing produce, decreasing the need for field farming, and reducing the effects of deforestation and harmful pesticides. Having already raised $100 million, Aerofarms currently sells its produce to major grocers such as Whole Foods and FreshDirect for wide distribution. In the future, Aerofarms hopes to better integrate artificial intelligence to monitor and grow plants efficiently.

All of these disruptive startups could not perform without proper financing. New spaces for the financial industry to adapt to the changing nature and goals of these startups are emerging to meet demands. For example, Datawatt Energy introduces blockchain technology to restructure the way wind projects are financed. The idea is that anyone can use the Datawatt app to research wind and other renewable energy projects and then purchase tokens to help finance the project. Each token represents a specific number of kilowatt-hours, and once

Boyan Slat’s environmental NGO, The Ocean Cleanup

Plastic trash in the Great Pacific Garbage Patch

the project is built, owners of the cryptocurrency will receive a portion of the profits from Datawatt’s energy sales. This is a unique and innovative idea for two reasons. First, since cryptocurrency is easily accessible and tradable, this democratizes the financing process and can spur more growth in renewable energy projects due to the lower costs. Second, Datawatt also uses blockchain technology to monitor the project’s progress, profitability, and environmental benefits. As a result, Datawatt Energy could be the beginning of disruptive financial innovations and more economically pragmatic clean energy projects.

All of these startups are leading examples in environmental sustainability efforts. However, these markets face their own sets of challenges. For example, there is a growing concern among investors that a “Green Bubble” is emerging, where sustainability startups have received too much hype and thus have unrealistic valuations. The biggest issue for investors is that sustainability startups carry a relatively high amount of uncertainty and risk because it is a relatively new and growing industry; similarly, these kinds of startups face potential challenges that people have not encountered before. Sustainability tends to be capital intensive with high barrier-to-entry costs due to expensive technology, scaling obstacles, and the inability to generate short-run profits. For example, NanoSolar, a leading thin-film solar startup with over $500 million in VC capital raised, is now selling off its assets due to inefficient technology (15-20% efficiency), high production costs, and scaling issues. Thus, sustainability startups carry more risk through high burn rates, expensive and inefficient technology, and short-term tradeoff.

Nonetheless, future trends indicate that socially responsible investing is still projected to increase. From 20142016, impact investing doubled from $64.3 billion to $121.6 billion with energy renewables leading the sector. This is driving a new set of asset classes that offer a wider spectrum for investors such as clean energy mutual funds, green bonds, and environmental, social, and governance (ESG) focused Exchange Traded Funds (ETF). Additionally, Smart City planning through green infrastructure investments are growing, including expansion of zero-net-energy buildings. Finally, according to the global consulting firm Roland Berger, over 75% of consumers factor Corporate Sustainability Responsibility into buying decisions, indicating potential value and lower consumer risk market expansion. Although sustainability startups face undeniable challenges, the overall market trends indicate a continued increase in investing and growth opportunities. This seems to be only the beginning of an era of smart and sustainable enterprise.

CORNELL BUSINESS REVIEW | 25

SUSTAINABILITY

SUSTAINABILITY

Trouble in Paradise

By Shilpa Sadhasivam

Coral bleaching caused by ocean acidification in the Great Barrier Reef - a popular tourist destination (above)

W

hether strolling sandy beaches or bustling through an energetic city center, everyone has places that remind them of relaxation, adventure, and renewal. It seems that many of these destinations may be forever within grasp, however; environmental threats of degradation or complete elimination continue to take a toll on tourist industries across the globe.

Climate change poses a looming threat to the environment. Given the U.S withdrawal from the Paris Climate Accords, it becomes increasingly more imperative for the world to cutback on fossil fuel usage in order to mitigate irreversible damage to the environment. Tourism, the very industry enabling people to venture beyond home and significantly contributing to the GDPs of countries worldwide, faces threats of permanent alteration and destruction.

Climate change wreaks havoc on tourist destinations, eventually altering most places. One such effect is rising sea levels; according to the Intergovernmental Panel on Climate Change, beach destinations bring in over 80% of the United States’ tourism revenue and more than 60% of Europeans opt for a beach destination vacation. Yet, according to the U.S Geological Survey, over 68% of beaches on the United States east coast are eroding at increasing rates, costing increasingly more amounts of money to replenish the sand-starved beaches each year. As sea levels rise, the rate of erosion increases, intensifying as time passes. Often, the costs of these repairs are taken on by hotels, resorts, and condominiums in order to maintain one of their main attractions for tourists. Plans of moving resorts farther away from the shore are potential means of combating this impending threat. However, infrastructure changes are costly and may not be sustainable as sea levels are predicted to rise for the next several decades, eventually overtaking some coastal areas. For instance, even a one

26 | CORNELL BUSINESS REVIEW

meter rise in sea levels would damage 49–60% of Caribbean tourist resort properties, lead to the loss or damage of 21 airports, and inundate land around 35 ports, predicted by the Intergovernmental Panel on Climate Change (IPCC). They also estimate that the cost of rebuilding tourist resorts in this region by 2050 will reach between 10 and 23.3 billion USD.

Not only are the structural aspects of beaches affected by climate change, but the flora and fauna of tropical locations currently face endangerment from ocean acidification. CO₂ emissions combine with the water from oceans to produce carbonic acid, changing the water’s pH levels, and harming or killing marine life from the increased acidity.

Marine life is a popular attraction for eco-tourism; activities such as scuba diving and snorkeling over coral reefs will be rendered pointless as miles of coastal reefs and sea creatures continue to die at alarming rates. According to Time magazine, the death of coral reefs represent a $350 billion per year loss for the economies that thrive off of their presence.

Other tourist activities such as whale and dolphin watching are threatened as ocean temperatures warm and their food sources are depleted from acidification. These damages result in changing migration patterns and threaten the existence of these animals. Safari tourism is expected to suffer enormous damage as the IPCC predicts that by 2080, over 40% of sub-saharan animal species will become critically endangered.

As global temperatures continue to warm, winter travel destinations will find it increasingly difficult to provide winter recreational experiences to customers. Ski resorts across the United States and Northern Europe experience warmer winters every year, leaving fewer days available for winter sports. According to a study published by Colorado climate scientists, if carbon emissions are not reduced by 2040, there will be little to no area in the mainland United States that can

support skiing by the year 2090. Even if emissions are curbed by 2040, under all prediction models, ski resorts, on average, will face shorter seasons, resulting in an approximate $2 billion loss annually.

Even historical and cultural wonders are not safe from the widespread effects of climate change. Prediction models of temperature increases by climate scientists from Columbia University indicate that entire regions of the globe may become completely uninhabitable by the end of this century. Regions of risk include areas of South and Southeast Asia and the Middle East. Each of these areas are home to popular manmade and natural wonders of the world, making these destinations completely inaccessible by the end of the century, if predictions are correct. According to Reuters, tourism comprises about 13% of Egypt’s workforce and accounts for $13 billion of their GDP. In India, tourism is expected to rise at an annual rate of 6.9% and comprise over 10% of the country’s GDP. The possibility of large masses of land becoming uninhabitable would devastate local and national economies and any progress made for internal development and standards of living.

Climate change has the potential to destroy major sectors of countries’ economies or cripple entire economies indefinitely. The World Tourism Organization under the United Nations determined that tourism is a primary source of foreign exchange earnings in 46 out of 50 of the world’s least developed countries.

This leaves a large portion of the world’s GDP at risk given threats that climate change brings to tourism. Developing nations losing GDP and opportunities for advancement is devastating to the native people, stagnates progress, and increases wealth inequality across the globe.

Developed nations are at risk of economic destruction, as well. Countries like the United States have various coastal cities that face rising temperatures and sea levels. Places like New York City, San Francisco, and Miami are at, or close to, sea level and are projected to have massive flooding within this century. When using the FEMA 100 year floodplain measure, which predicts sea level rises until 2100, Climate Central reports that the cities of New York, Miami, Baltimore, and Houston are among the most vulnerable to flooding and are most likely to struggle to recover socioeconomically.

With combined populations of over 12 million people, these areas are projected to face billions of dollars of damage and land adaptation. Miami and New York generate over $90 billion of tourism revenue for the United States economy

per year. However, the National Academy of Sciences projects that almost the entirety of lower Manhattan and the surrounding seaside boroughs will be underwater, and the entire city of Miami will be submerged by 2100. As a result, tourism revenues will be lost and property damage will ensue. Entire hubs of the tourism industry will shut down, leaving major losses for economies and peoples.

There are short-term measures that can be implemented to stave off damage and preserve vacation areas. Although resorts currently pay thousands of dollars to prevent beach erosion and build hurricane and flood resilient infrastructure, beaches will eventually be submerged along with the surrounding resorts and other properties. Winter destinations, like ski resorts, can be moved to higher altitudes in order to create longer winter seasons. Even so, rebuilding entire resorts will be an expensive business burden, perhaps only tolerated by the largest of travel companies. Relying on artificial snow machines poses a possible alternative for winter resorts, but this is only possible for a limited amount of acreage, requiring the winter sport industry to massively scale down their operations. While these solutions may be viable for several decades, at the current pace, climate change will eventually overcome these preventative measures and result in serious limitations and losses to the tourism industry.

The most effective way to retaliate against climate change involves addressing the source of the issue: emissions. The tourism industry itself contributes approximately 6% of global carbon dioxide emissions. Within the next 10 years, tourism is expected to account for 10% of global carbon dioxide emissions and continually rise thereafter. With these increasing emissions and their role in climate change, steps must be taken to

reduce this increasing carbon footprint.

Research from the IPCC states that 95% of tourism’s emissions come from transportation and the “built environment,” otherwise known as the energy used to create and maintain tourist buildings and attractions. Both of these emissions sources can be easily reduced by enacting and enforcing energy standards, and researching and developing alternative energy sources. Currently, airlines are experimenting with replacing kerosene with biofuels, which offers direct greenhouse gas (GHG) emission reductions of 30–90% when compared to fossil fuels.

Although more expensive, shifting to electric or hydrogen-fueled vehicles can dramatically reduce emissions from road vehicles used on tourist trips. As for the built environment, creating new infrastructure that is retrofitted for alternative energies, like solar, or requiring implementation of energy standards to lower emissions to zero, can cut carbon use.

While science and technology make these alternatives within reach, standards require legal implementation to maximize change and promote energy-conscious behavior. The subsidization of alternative aviation energy research is limited and ought to be incentivized through governmental policy, not only in the U.S, but throughout the world. Fighting climate change to protect the tourism industry must start within the tourism industry itself in order to make lasting impact against the impending disaster that is climate change. However, tourism is not the only industry in need of great change; industries such as agriculture, manufacturing, oil and gas, as well as the general public, need better waste and emission control. As a species, if we continue to straggle behind the imminent effects of climate change, we can only expect to see the places we love and admire disappear, gone forever.

Wildlife tourism: Engal tiger crossing road in front of watching tourists (above) CORNELL BUSINESS REVIEW | 27

an exclusive interview with

Steven Gal Entrepreneur and Professor at Cornell SC Johnson School of Business

ing and working with Entrepreneurship at Cornell. And the way that I came back to teach at Cornell is that Professor BenDaniel called me at the right time in my life and said, “Steve, I’m thinking about retiring in a year or two, and I was wondering if you’d come back and help me, you know just plan some things out and transition some classes and do some teaching - for one year.” That was ten years ago. I think he was never going to retire. But teaching with him and working with these students over the years and recognizing that David had spent thirty years building what we had built so far, we saw there was so much more that needed to be built at Cornell to serve entrepreneurs. I can’t imagine a more rewarding career that I’ve had this last decade than helping work with Cornell and great people to build. We have built three buildings for entrepreneurship (up from zero) - we have built the eLab accelerator program, wehave hundreds and hundreds of students taking classes all over campus. Students are starting companies and PhDs are learning in our I-Corps programs. When you have a long term relationship with a place like Cornell all these amazing things can happen that allow you to benefit and others to benefit - pure goodness.

It is a pretty rare place where you can have this kind of complex, thirty year relationship, and do all these different things. It’s not just me, by the way - several of the people who teach here now are David’s former students. Cornell has impacted me and my career literally end to end.

With Cornell having such a preprofessional culture what advice would you offer to students seeking to go against the grain and pursue a less traditional career path in the entrepreneurship space after graduation?

How did your student experience at Cornell influence/ shape your interests and career path and why did you eventually decide to return to Cornell as a professor?

Cornell helped me in several ways at several points in my life. As an undergraduate during my freshman year, I thought I was wasting your time, I wanted a business degree, but had to take courses on Biology and Soil Geography. I was not very engaged, and some of my most influential teachers said if you want to go to work, go to work. And so after my sophomore year, I dropped out of Cornell and went to work on Wall Street. There were many reasons why I was able to get a job on Wall Street, but being a Cornell student certainly didn’t hurt at all. The prestige and the brand of Cornell tremendously helped me to get where I wanted to be, even short of a degree.. So I found myself working on Wall Street doing risk arbitrage and doing quite well in all respects, as as 20 year old college dropout. At the same time I was questioning the honesty and, ultimately, the legality of the behavior of some of people I worked for.

I saw many things that made me uncomfortable enough that I reached out

to my mentors - including those same professors at Cornell, and asked their advice.. And I said here’s what’s going on around me. I’m doing really well, I’m making money, I think I could be successful here. But what is happening around me is making me uncomfortable. I think this was around Thanksgiving of 1989. My teachers gave me different advice than most some of the people I knew in New York. They said you can’t do this. If you lose your integrity you can never get it back. You have to stop now. You are ready to come back to Cornell. So I took their advice, and eight weeks later, I quit my job and drove my car up to Ithaca and re-enrolled in classes. And I came back to Cornell, and at that point it was a totally different experience for me. Years later, when both of the people I worked for went to jail for stealing over $600 million from their clients, I finally understood the peril I was in and avoided.

except back then there were like four students in entrepreneurship - a very, very small group. And I sort of fell in with them and I actually started doing some entrepreneurial work got to do a little coaching and teaching. And it was there in that process that I met Professor David Ben Daniel. Professor Ben Daniel was my mentor and my friend since then - and I had the opportunity to teAch with him here until he passed away last year. I took David’s class NBA 3000 that we teach to undergraduates to this day - and in that class I found out I was an entrepreneur. David helped me realize that is what I was. That my behaviors, that my proclivities, all these things indicated that I was a classic entrepreneur, at least as they defined it at that time. And so that shaped me in two ways. I made a decision that I was going to pursue entrepreneurship. And I also just had such regard for the teachers and the professors who had helped me that I decided The big influence when I returned was I wanted to teach entrepreneurship. that I got involved in Entrepreneurship at Cornell which is an organiza- Cornell influenced me all the way tion that exists to this day. In those through my career. I moved to Calidays it was very in its early days and all fornia, became an entrepreneurship of these Cornell alumni entrepreneurs professor at USC, jumped out with the had gotten together and formed an ad- internet to do startups, and kept comvisory council. it’s a lot like it is today ing back to Cornell and guest lectur-

I think this is a matter of perspective. It is extremely important for current Cornell students - all young people - to learn to think for themselves. Critical thinking is the essential framework to make sense of a world that is changing. It’s is a skill I learned in law school. I have a college-aged student now, and I’m teaching college age students again and spending more time with them. And at a place like Cornell, they are brilliant, accomplished, incredible people. But the issue I see is students who are trying to do everything, they take on so much, they set such lofty goals for achievement and measure themselves against the brilliant person next to them. And frankly they are overwhelmed and stressed and report a lot of anxiety. This is very concerning for me because college, when I went, was mostly just awesome fun. It was low stress. When you have worked so hard to achieve so much to get to in to Cornell, it is natural to continue to work hard and achieve and to get high grades and be president of this and head of that and et cetera. That naturally leads you to go try and get the job at the big investment bank or the big consulting firm or whatever the “best” job is and continue to achievemaybe even grow to become the youngest partner. There’s nothing wrong with any of that if that’s your choice - if that’s what you really want - if that makes you happy and will meet all your needs and requirements.The problem is, I just don’t see students being discerning in that way.

I see them struggling - how can I pass up that opportunity and do something else. One of the things I’ve learned clearly is that in the end you only know the outcome of the path you choose. You’ll never know what the other path would have led to - it is unknowable. You can guess but it’s futile, right? And so when I talk about critical thinking - Professor Risa Mish teaches it a Johnson, she has really made it into - field - it needs to be part of your core now.

In fact, even if you follow a traditional path and go to the investment bank, et cetera, the world that you will have your career across the next forty years which is going to change dramatically. The world’s going to take you. That

career path will disappear or change dramatically. The direction of opportunity and the skills required will change.

It will be done to you if you don’t do it yourself, and that’s much more painful. Better, I think, to be thoughtful and develop your own skills in order to think and act through rather than have it happen to you. That’s what I think entrepreneurship and innovation is really about - that’s what we’re really trying to teach. What process can you take to look at the world and make things work - for you, for your customer. What do you value? One of the funny things about entrepreneurship is when you want to know what something’s all about, you watch it, you observe it and then you go have empathetic conversations about it. Most of the people I know take a job without ever doing that. They never actually really look at what those people’s lives are like. They don’t look at it closely and watch their lives. And they don’t really ask empathetic deep questions. They’re so busy trying to get the job, they don’t ask them, “Are you happy? Do you think you made the right choice? What’s the hardest part about this? What do you love the most?”

These are the questions that you probably should be asking.

What did you find most challenging about founding a startup such as ID Analytics? And then conversely, what do you find most energizing about the experience?

I’ve co-founded several companies. It’s very different early on, especially with your first company, versus the companies you might follow with. When you look at creativity, there’s are two aspects to it- something has to be novel, and then it has to be useful. If it’s not useful, it’s not really creative innovation. What we find is that when you’re young, you seem to be very good at the novel - coming up with new ideas. But you tend not to be as good as utility because you don’t understand how the world works and where things fit and what’s important. Later, as you get older and more experienced and you’ve seen all these patterns again and again, you develop intuition - this knowledge that enables you to see patterns and shortcut a lot of things - that’s experience. At the same time, if you are looking backwards at patterns, you’re not positioned to be novel and look forward athow the future will change.

By the time I co-founded, ID Analytics, I had had several successful companies. I had several sales and one initial public offering. I was able to, from the very beginning, do things better. I picked a great co-founder and he picked me. It was the best co-founding experience I’ve ever had.

I knew how to do that better than I had in the past. We raised money very easily. I knew how to do that so well that we raised $10 million, which was a lot of money back then, in literally a matter of weeks. I knew what to do to get a company up and running and going. All of that made that really just a phenomenal exciting experience. Other times in my career, like the first time I raised money, you feel a little bit like you’re wandering the desert. And I was. It was more about persistence and perseverance than it was about patterns or skills or experience.

There’s a difference between being a founder and being an entrepreneur. A lot of people can be entrepreneurs. A lot of people should be entrepreneurs. I don’t know that we’re making more founders. People who say, “There is nothing here. I’m going to put my name on the door and make this mine.” That’s energizing for me. It’s exciting for me.

I always say, “If you formed a chess club and you wanted me to be a founder, I might join even if I don’t play chess.

I’ll learn. But if I can’t be founder, I’m less interested.” That excites me more than anything else. I don’t know exactly why. When I had my first big company failure - we raised $15 million and burned through it, it was a wake up call for me. I never envisioned failure - It had never occurred

to me that I would fail at that point. You can’t control the largest financial crisis in the history of America.

That’s something that happens and it doesn’t matter what you’re doing that day. I just find the experience of founding things energizing. Being there at the beginning with those people and it’s all up to you.. It’s all about those experiences that you have with the people. Going through it with other people and the relationships you build and the crazy things that you do together is what energizes me. And of course, solving the customer’s problem by ever forget that - that is the job of the entrepreneur.

That’s our number one. When you delight a customer, it’s special. It’s a very satisfying and rewarding experience.

What were your most meaningful takeaways from your greatest successes as an entrepreneur?

And your greatest failures?

I think I often refer to John Alexander when I think of this. He is a very successful and involved Cornell alumnus - he has been a Cornell Trustee and our Entrepreneur of the Year and a huge contributor to our entrepreneurial ecosystem.. When he won the Entrepreneur of the Year award, he spent almost an hour-and-a-half in his speech just thanking other people. It was unbelievable - the gratefulness and the number of people he spoke about..

You might think that would be boring if you don’t know the people he was talking about but I can tell you that the audience found it wonderful to hear and see this entrepreneur thanking everyone who was a part of his success.

The most meaningful take-away I have of any of my success is how little, frankly, I had to do with it. The extraordinary people that I’ve worked with who have helped create those successes are the most surprising people and they contribute in the most surprising ways. For every successful things I’ve been involved with as an entrepreneur, what I think about, what I remember, are those people.

That amazing salesperson who did things that I couldn’t image could be done and those technologists who developed our technology for ID Analytics and named it and positioned it in a way that made the customers just live it - these heroic things that people do to create value.

What I realized is I think part of the problem with being a corporate CEO today - you’re treated like you’re a king or queen. You are seated a private jets and receive special treatments - all of which get you farther and farther away from your actual customer who does not live that way in almost all cases. The thing about being an entrepreneur is you’re basically shoulder to shoulder, hand in hand with all these other folks at all these other levels trying to get it done. And you realize that it’s them. It’s the other people actually get it done. And it is humbling. That’s the biggest take-away - how it takes a village, how it takes a team.

That’s all I think about now when I think about founding a new company - the team. Who’s going to be my co-founder and what is my team going to look like? I don’t even care about what we’re going to do yet. That’s secondary.

My greatest failure was ProQuo - a company I started in 2007. What I learned was that no amount of experience relieves you of the requirement to do the basic entrepreneurial work of customer discovery and development. I was in a situation where I was very experienced and the people I was with were very experienced. We were able to raise $15 million quite easily without doing much customer discovery work. We failed to do the some of the important things that I now. teach in classes properly, because we thought we were experienced enough to skip steps, and the Investors thought we were experienced enough that they did not push us..That was the clearest reason we failed. Is our failure to do that. It was that experience that

led me to teach right away when David called me because I actually had something to teach. I will tell you, you learn much more from your failures than you do from your successes, because you actually know why you fail.

Having served as a member of the teaching team within eLab, what elements would you say make for the most successful student startups and why?

So, I have a philosophy that I use with my internal folks -when we’re selecting teams for eLab, one of my criteria is that they be able to succeed despite my assistance and advice. And I say that tongue-in-cheek, but to me, if I were to point to one thing that I see in the most successful entrepreneurial students, including the eLab teams, is their ability to have tremendous confidence in themselves, their abilities, their brains, and their knowledge. And at the same time to be able to go out and get the advice, and the assistance, and the money, and the resources of very experienced, in many cases, very successful luminaries and have enough presence and confidence to look at what people are telling you, what you are reading, what you are hearing filter through your own critical thinking method. And sometimes say - “No, billionaire (or professor), I don’t agree with you. I’m going in this direction.” I think is the coachability is the critical thinG - ability to take coaching and decide what to follow and what to ignore.

Because that’s what we’re offering them largely in coaching if they can take input and filter through it and accept and reject it regardless of who’s giving it to them, then we can really help them. After I give advice or counsel I say, “By the way, I’m about 50% right, and I’ve worked a long time to get to that level.” So you have to decide whether I’m right or not- that’s critical, and I think students struggle with that. Even as a professor, they will often consider my opinion on things in which I have no expertise, to be more valuable than it is, because of my title or role.

Who is your dream co-founder?

Well, I’m actually looking for a co-founder now. And so today I think a lot about that. So my dream co-founder is somebody who I can trust. Trust is the most important thing - it is the basic building block for great team.

That required a similar view of what trust means - that we would define trust similarly. Because in my view, all important long-term relationships, which a founder relationship fits - the entire basis of everything is trust.

And if you could have that trust, then you can build good relationships. And the ability to define for yourself what trust means, to be able to communicate that, to me is essential. And so, that’s at the base. Then I start to look at complimentary behaviors and skill sets and capabilities.

You know, in my world, a perfect co-founder is going to be somebody who’s really good at things that I’m not good at, and like to do things that I don’t like to do, and vice versa. I am not very technical, and so I like technical co-founders. And as I look at considering a co-founder now, I think about what kind of culture I want to have in a company, and what kind of people do I want to be able to recruit? One of the things I’m thinking a lot about it is, for instance, that hiring women has become a strategic competitive requirement. If you want the best people, you have to hire the best women - they’re graduating from high school, college, graduate school, MBA, and PhD more often than men now, and they have the skill sets and the capabilities. And so what are the odds, if you found a company with all men, that you’re going to create a culture that’s powerfully welcoming to women?

It’s probably low. But if I have a female co-founder, then I am building this culture at the very core - and it will last.

About CBR | Who We Are Cornell Business Review is the premier undergraduate business publication at Cornell University. A student-run magazine that discusses business issues, trends, and debates among college students and alumni, CBR provides insight into recent events and passes along advice from student entrepreneurs and industry leaders and pioneers.

In addition to our print publication, we also produce CBR Now, a new online source for business news with regular updates each week.

Our Team Editor-In-Chief Managing Editor Business Manager Design Director

Josh Thompson Samantha Torre Kathryn Fanelli Elena Setiadarma

Editorial

Business

Design

Associate Editors Ethan Wu Rija Tayyab Matt Peroni

Annabel Bacon Emily Desmond Nicole Johnson Kathleen Curtin Amanda Kilchine Bjorn Kvaale Emily Shiang Jordan Eskenazi Max De Ledebur Manan Modi Isha Janjikhel Adam Khatib Julia Kim

Alessandra Piccone Daye Shin Grace Santarelli Cindy Jin Michelle Huang Jeremy Ben-Meir Meridien Mach Laura Barrera

Writers Evan Shields Derek Kartalian Rubin Thomas Winny Sun Steven Romero Shilpa Sadhasivam Karla Kim Aaron Buchwald William Wang Shirley Huang Jeremie Mutolo

Editorial | Business | Design www.cornellbusinessreview.com