John Wilson Dickhaut (1942-2010)

I first met John Dickhaut in January 1973, when I interviewed at the University of Chicago's Graduate School of Business as a rookie faculty candidate. I noticed his unusual combination of simultaneous playfulness and intensity. Later that fall when I joined him as a colleague, he was going through a difficult personal phase. That unusual combination kept showing up often in conversations "his light-hearted comments had a serious undercurrent, and his serious remarks covered the ideas he was have fun playing with and turning over and over in his head. I once asked him about his intensity, and he told me about his training in method acting when he hurt someone with a knife on the stage, and fortunately for us all, turned from stage to scholarship.

John had graduated from Ohio State three years earlier where he had been trained in behavioral research in accounting, focusing on how individuals used information to make decisions. This area of research derived from ideas on psychology and social psychology, and his dissertation was recognized with the Manuscript Award given by the AAA for outstanding work by young scholars in the first five years of their careers. The commitment to understand information stayed with him through the following four decades as it became both deeper and broader.  His intellectual curiosity, ferment, and honesty never let any doctrinal walls confine him. His free spirit constantly rebelled against any attempt to fit him into any convention or definition. Not surprisingly, chair of the department in which he worked had to be really good at improvisation.

During the seventies and the eighties, when we both served on the faculties of the University of Chicago and then at the University of Minnesota, I saw him dance through a world of ideas with his characteristic panache.  There were years when you could not separate his right hand from his chess board, while the left carried a dog-eared copy of one or the other volume of Bruno de Finetti's Probability in the other. He took his books everywhere--to meetings, classes, and bed "ever ready to talk about the particular theorem or idea that excited or upset him at the moment. A year later, he may be in a different landscape, perhaps with his backgammon set, and a copy of Maurice DeGroot's Optimal Statistical Decisions this time, but just as immersed in both. When he started running, even bitter Minnesota winters will not keep him from doing his eight miles until the doctors had to almost force him to stop. What we saw come out of him during the past 25 years was a result of that deep immersion and constant ferment inside Like in a volcano, what we saw above surface was but a small fraction of the vast pool in turmoil inside him.

John was not interested in impressing anyone with his work. He lived in a world without hierarchy. Everyone he worked with was a friend, a lifelong friend I might say, especially the PhD students who were drawn to him by his intensity, charisma, commitment to work that know no boundaries of time and calendar. What he wrote, when he did, just oozed out, almost as a by-product of his thought and life. There was no separation between the two. I never saw him write for the sake of writing, or to get a publication. In the business and economics departmental culture where intellects are often sought to be measured in pages of publications and number of citations, John did not even pretend to fit in. To him, the idea of doing research for promotion or tenure was alien; it wouldn't be research, and he would not be a part of such an enterprise.  And yet, by not trying to do so, he ended up being a model of scholarship.

John hated being predictable. How do you characterize this unique man? In words of Bhagwata Gita, he was a karma yogi who enjoyed his work, without dwelling of the fruits of his labors. Ultimately, he was a man who would not be modeled.

People misbehaved in Delhi BECAUSE police was not there!-news report

Indo-Asian News Service (January 02, 2012 19:23 IST) informs its readers (http://www.ndtv.com/article/cities/new-year-hooliganism-due-to-lack-of-cops-gurgaon-residents-162951&cp):

Gurgaon: The drunken hooliganism witnessed here during New Year celebrations, when hundreds of revellers created ruckus on the Mehrauli-Gurgaon Road and even molested a woman, occurred due to shortage of police personnel, eyewitnesses said on Monday.

Now it is a remarkable proposition for a free democratic society: the witnesses find the reason for molestation of women to be the absence of police to prevent such behavior. Even more remarkable is the fact the reporter accepted and reported this explanation on the news wire. Perhaps Justice Katju, the chair of Press Council of India is right after all.

Why Has the Indian Retail Sector not Modernized?

In the recent controversy about foreign direct investment in the retail sector, the conspicuous failure of Indian entrepreneurs to modernize the industry has remained largely unaddressed.  An efficient supply chain linking producers to consumers calls for a commercial code, business relationships, reputation of products and their brands, transportation, warehousing, financing, and software to operate and control the system. But all these elements are already present or available in India. Why does India need a Walmart to lower the prices its consumers pay? And therein lies a tale.

Efficient mass merchandizing calls for a large scale with hundreds if not thousands of outlets. Control of large networks requires stocking and pricing policies, software for managing logistics and transactions, as well as databases in which all goods and related events throughout the network, including billions of transactions, are captured and permanently recorded in a traceable and auditable manner. Integrity of these databases, being crucial for the ability of the management to identify bottlenecks and remove inefficiencies, is jealously guarded.

The system that serves to manage large retail organizations is also convenient for the tax payment and collection. Complete record of goods, cash, and transactions facilitates easy and fast preparation of internal and external financial reports as well as returns for sales, income and any other taxes. The system creates a difficult-to-manipulate audit trail making it easier for management to track any misappropriation of inventories or cash handled by thousands of employees in locations spread across the country. Further, it is easier for the independent auditors of financial reports (for publicly-held firms) and for the government tax auditors to verify the records. Integration of large scale operations and the information system designed to serve them is essential to their efficiency. For example, this system may enable a chain with thousands of stores to track the sale and inventory of each of their tens of thousands of items in real time, and request vendors to ship additional supplies to locations as needed within minutes.

Efficient operation of such an integrated system has two simple requirements: a pricing policy and tax payment. Without a pricing policy, each interaction with customers presents an opportunity to bargain. Bargaining can allow the seller to price discriminate (charge a higher price from customers who place a higher value on the good) and thus earn higher profits. However, in a chain of stores where the owner cannot be present to do the bargaining with every customer, the risk of moral hazard associated with delegating the bargaining function to hired employees becomes too large. Most Indian retailers either do not post their prices, and even when they do, the prices are subject to bargaining by customers who know better. Retailers think that the advantages of extracting a higher price from some customers outweigh the consequences of limiting themselves to a mere handful of stores managed by trusted employees or family members.

Payment of sales, income and other taxes is an even greater barrier to modernization of retail industry in India. By not recording purchase and sale transactions, or recording them selectively in two separate sets of books, is a common method of evading taxes in many parts of the world. India is no exception. Modernization of retail industry, accompanied by integrated and transparent information systems, makes it easier for governments to collect their due. Operator of a large chain who asks the employees to evade taxes becomes susceptible for pressure and blackmail by employees. It is not surprising that entrepreneurs often take the simpler route of keeping their operations small enough to manage through direct personal supervision.

Indian retailers can and should break out of the self-defeating confines of the beliefs about the profitability of tax evasion and bargaining with individual customers. When they do, they can earn much larger total profits on higher sales volume from expanded operations in spite of narrower margins. Narrowed margins, combined with economies of scale of operations, and expanded bargaining power vis-a-vis producers will enable them to lower the price to consumers. Consumers will respond to lower prices by buying more, and increasing total profits of retailers.

It may take entry of foreign retailers to alter the beliefs of Indian retailers about their business model. Once that happens, Indian retailers can be expected to develop modern chains of their own; they may even take their business abroad. If they do, Walmart may have to watch out for its own territory.

TheMint, January 9, 2011