This week on our Masters in Business podcast, we speak with Robert H. Frank, Henrietta Johnson Louis Professor of Management + Professor of Economics at Cornell’s Johnson Graduate School of Management.*
Frank has written numerous books, most recently, Success and Luck: Good Fortune and the Myth of Meritocracy. He co-authored a best-selling economics textbook with with former Fed Chairman Ben Bernanke titled Principles of Economics. He is perhaps best known for his 1995 book, The Winner-Take-All Society (co-authored with Philip Cook). It won the Critic’s Choice Award, was named Notable Book of the Year by The New York Times, and was on Business Week’s list of ten best books of the year. Professor Frank was one of the earliest economists analyzing the impact of income and wealth inequality from an economic perspective.
His latest book discusses the tendency of people to underestimate the impact of chance – and over-estimate their own skill sets – in terms of financial outcomes. The implications for investors are many and broad.
Frank has been studying the subject of income inequality from an economic perspective for several decades — long before its recent popularization by economists such as Thomas Piketty and Emmanuel Saez.
We discussed some of the more fascinating statistics Frank analyzed from the 1990s – and they sound almost as if they were written yesterday:
“The incomes of the top 1 percent more than doubled in real terms between 1979 and 1989, a period during which the median income was roughly stable and in which the bottom 20 percent of earners saw their incomes actually fall by 10 percent.”
Frank also describes how many of the factors which are currently driving inequality – automation, globalization, and tax code changes – are longstanding parts of a changing economic dynamic; The key difference is that their impacts have increased dramatically in the post-crisis years.
Next week we speak with, Jeff DeGraaf, CFA/CMT, Chairman and Head Technical Analyst at Renaissance Macro.
* where he has won numerous teaching awards Johnson School’s Stephen Russell Distinguished teaching award (2004, 2010 + 2012) and Apple Distinguished Teaching Award in 2005. In he was awarded the 2004 Leontief Prize for Advancing the Frontiers of Economic Thought
Books discussed during the podcast:
• Micromotives and Macrobehavior by Thomas C. Schelling
• Everything Is Obvious: How Common Sense Fails Us by Duncan J. Watts
• How We Know What Isn’t So: The Fallibility of Human Reason in Everyday Life by Thomas Gilovich