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 is the author of numerous books, most recently, Success and Luck: Good Fortune and the Myth of Meritocracy. He is the co-author with Ben Bernanke of the textbook Principles of Economics. He is perhaps best known for 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 the ten best books of 1995.
Professor Frank discusses how people tend to underestimate the impact of chance and over-estimate their own skill sets. 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 it became popular in recent years. We discuss some of the statistics form the 1990s that sound as if they were written recently:
“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.”
We discuss how many of the factors which drive inequality have been around for a long time, and how they have dramatically accelerated recently.
Next week we speak with, Jeff DeGraaf, CFA/CMT, Chairman and Head Technical Analyst at Renaissance Macro.
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
* 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. 2004 Leontief Prize for Advancing the Frontiers of Economic Thought.