The economics of winning a Nobel Prize

The economics of winning a Nobel Prize are significant and go beyond the cash value.

This year’s Nobel Prize winners have been announced and the ceremonies are soon upon us. The economics stack up in a particular way.

The Prize comes itself comes with a cash award and a medal. The cash component is Swedish Krona 8.0 million (approximately €1.2m or US$1.0m).  The prize money is split eqaully if there are multiple winners. In addition, winner receives a medal (composed of 175 grams of 24-karat gold) has an intrinsic market value of US$10,000; higher for its scarcity value.

But the Nobel Prize is not about the money. It is the recognition and prestige associated with it. Certainly for the individual, colective efforts of co-workers. One can trade on a reputation. Also this kudos translates into dollars and value for the associated institutions and universities through fund-raising, transactions as well as attracting better quality students and faculty. Ask Harvard or University of Chicago.

There are some interesting statistics about the Nobel Prize winners. There have been 560 Laureates to date, yet only 45 have been women. The youngest was 17 (for the Nobel Peace Prize; and 25 for the traditional ones, announced in Stockholm); the eldest 90 years old. As to nationality the US leads with 29%, followed by the UK (16%), Germany (14%), the bulk of the remaining 41% from greater Europe; then Asia and Latin America.

Looked at it another way what was the investment to win a Nobel Prize?  Certainly it is not a specific target for many institutions and individuals (and there are some). However the kudos of wining is certainly a motivational driver for many scientists. It has been estimated that in 2010 alone over US$ one trillion was spent on pure R&D activities. Consider that Just one basis-point (1/10th of a percent) is equal to US$ 1 billion (1,000,000,000). So was that the Nobel motivational investment?  Go figure!

Money in and money out. So what did the laureates spend their winnings on? Well while a million sounds a great deal, especially to a silver haired academic or author, it doesn’t go that far. There are some immediate costs just to attend the prize-giving celebrations. On average these incidentals (for clothes, travel, lodging and food, etc) can run up to $20,000 for the prize-giving weekend. Though the banquet, on 10 December in Stockholm, is for free.

Frank Wilczek–Physics 2004 stashed his cash in a savings account. Others paid down debts or mortgages. One laureate built a croquet lawn (Richards Roberts – Medicine 1993; several have funded family education, other transactions or endowed scholarships or given it to charity. The some laureates have felt it was a joint effort, as did   John Mather – Physics 2006; with 1,500 co-workers. He donated the prize to a dedicated foundation.

That was the feeling Dr. Alvin Roth gave Justin Jenk, who co-hosted the prize winner at the Stockholm School of Economics in 2012.

On a ligher note, the Nobel Prize is the inspiration for a whole sub-industry, such as these spoof awards. The trading dynmics and economics of this sub-industry are significant.

Finally how much is a year of life worth? The average age of Nobel Prize winner is 63 years. A study by the ‘Journal of Health Economics’  suggested that Nobel Prize winners  had an extra two year life expectancy compared to their peers. Now that is value.

Do read my other blog entry “Ebola leaves us naked” at justinjenk.com or www.raktas.ee

Justin Jenk is business professional with a successful career as a manager, advisor, investor and board member. He is a graduate of Oxford and Harvard. Justin can be found at justinjenk.com  justinjenk.se or www.raktas.ee

Ebola leaves us naked

People feel naked in the face of the deadly Ebola virus.

Ebola is causing widespread panic. Are these fears justified? Experiences from past disease outbreaks, medical science and diffusion theory suggest that the current hysteria is misplaced.

While the human tragedy is unquestioned, the real epidemic may not be the Ebola virus but the loss of public confidence in government authorities. Such a loss may cause more harm to many more individuals in the future through the combination of prejudice and apathy.

A number of factors are fueling this manic panic. The mortality rates are high and rapid (as  the ‘Forbes’ article shows). As yet there is not a vaccine. The source of the virus seems to be due to a species jump (as with SARS); in Ebola’s case, fruit bats. The public’s current fascination with vampires and Dracula helps not one lite bit. More worrying is the continuing uncertainty as to whether the spread of the virus is physical or has transmuted into being air-borne. Debate on ‘You tube’ debate is intense.

These factors of fear are being compounded by a general and increasing lack of trust in public authorities and sources of information. There are good grounds for concern, but maybe not hysteria.

The loss of public confidence has been made worse by the combination of insufficient or conflicting information. Worse still has been official lethargy and confusion. The present outbreak was already reported in the general press in January 2014, which meant it was a well-developed problem on-the-ground in West Africa during 2013. The site of naked women, men and children – the victims of official lethargy have failed to move politicians into action. The Ebola virus has spread from Guinea, Liberia, Sierra Leone and now to Nigeria as this interactive map and timeline reveals. From rural locations to thronging cities. Viruses require hosts to survive and spread– cities provide ideal locations. Medicins sans Frontières believe the risks are huge and have stated the situation is “out of control”. The unfolding events suggest a scandal at many levels. The WHO has a great deal to answer for. The UK government’s decision to screen arriving passengers achieves little – except to confirm the growing disaffection with government. Better to screen departures and monitor carefuklly passenger movements after arrival.

Diffusion theory clear sets out how any disease (or idea) can spread. It follows a certain pattern. Researchers at Oxford University have demonstrated the importance of distance in this process. In the past trading routes linking economic centres provided the conduits: trading goods and diseases. The fears of bubonic plague remain embedded in the public’s collective memory as the trading ships form Constantinople to Genoa brought the “black death” to Europe in the 14th century. Another important aspect of diffusion is often described as an S-curve, as explained in Justin Jenk’s blog on adoption rates and the effect of time.  In this current Ebola outbreak the ‘Wall St Journal’ has developed an excellent graphic.

Viral and bacterial evolutions and diffusion are well understood. The public health authorities’ reaction to the Influenza pandemic 0f 1919-21, the Smallpox epidemic of 1947 and the Polio challenge of the 1950s demonstrate that western societies have been able to deal with such threats in the past.

What the current Ebola outbreak exposes is the worrying observation that perhaps modern society has passed its peak and its inability to deal with such crises. While we may be technically more capable we seem to lack the ethical and political will to act; the London School of Economics has captured the essence of this debate.

Economics rule for big pharma and vested interests. Reports from Guinea suggest that cures are available, Yet modern concerns with regard to “human screening” have prevented effective and timely trials. Certain conspiracy theorists suggest more sinister reasons.

The economics of this and other diseases are crippling to the national economies of West Africa. South Africa remains burdened by the continuing destructive effects of its HIV crisis to its economy and society.

Human tragedy to tens of thousands has been created by the current Ebola outbreak as well as shown destructive effects on society and the economy.  Public confidence is also the victim.

Do read my other blogs at justinjenk.com

Justin Jenk is business professional with a successful career as a manager, advisor, investor, entrepreneur and board member. He is a graduate of Oxford and Harvard. Justin can be found at justinjenk.com

Power Girl in the economy

Women in business? Women are the business.

While it may remain a ‘man’s world’, it is a simple fact, that women are the force factor of the economy.

Despite the continuing gap in pay (at least a 10% difference according to numerous sources) recent studies show that the purchasing power of Venuses represent nearly two-thirds of all consumer decisions; estimated at USD 15 trillion. That is overwhelming purchasing power that shapes behavioral economics and the economics of growth.

On average while women represent 45% of the workforce yet their representation in the C-suite or boardroom is much less. There are significant national differences. The EU average is 16% yet the Swedish average is 26% compared to the UK at 18% and most of the rest of EU27 below 12% according to an EU and Stockholm School of Economics study.

Writing for a ‘Daily Telegraph’ column, Justin Jenk cited the vital role played by women in corporate governance and the economy. The Harvard community has recognized this power of Venus. Harvard Business School has made it part of its offering through the gender initiative and the Harvard Business Review has written about it. Furthermore in a recent McKinsey study, it estimated that corporate performance was 50% higher for those companies with a higher representation of female senior executives and board members.

In the face of such benefits why the resistance.  The main challenge remains one of attitude. A recent study by London School of Economics reveals the legacy effects. The search for equality is correct but remains a long drawn out process. Recent legislative and social practices with regard to parental leave and child rearing.

Unleashing the full potential women in the workplace is something that benefits all of us. Gender equality in the workplace should be championed and nurtured. It is just good business and for the economy – women as well as men.

Do read my other blogs at justinjenk.com

Justin Jenk is business professional with a successful career as a manager, advisor, investor and board member.  He can be found at justinjenk.com

“Fake it until you make it!” – body language

Your body language matters!

Try Amy’s “power position”. An intriguing topic that does work.

I met Professor Amy Cuddy at my Harvard Business School reunion. While Amy was very engaging and approachable on stage (and as in this video) she is  very modest, even shy, in person (when we met afterwards for dinner).

Do watch it: 14 million others have for a reason.

As Amy extolls us: “Fake it until you make it!”