MIT Sloan Fellows Blog

The MIT Sloan Fellows Program has educated some of the world's most influential leaders. With this blog we look to share the collective wisdom of our global community of alumni and faculty. Stay tuned to find out what's happening on the international frontier of business and industry.

Using System Dynamics to Build Consensus

Martin CaprilesFor Martin Capriles, SF ’05, there is something almost magical about the Beer Game, a management simulator developed in the late 1950s by Jay Forrester and his students at the MIT System Dynamics Group. The game famously puts teams of students in charge of four components of a distribution chain. Players within each component—retailer, wholesaler, distributor, and factory—receive shipments of beer, fill as much of their customers’ orders as possible, and place new orders for beer with suppliers. As students make operational decisions and review the impact of past decisions, they inevitably are dismayed by the unintended side effects of their actions.

After leaving MIT, Martin Capriles headed back to Venezuela, his home country, where he was responsible for all commercial operations for the Venezuelan subsidiary of CEMEX. Almost immediately on arriving back at the office, he realized he needed to put the Beer Game into play—this time, with real world consequences.

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Should we be bullish or bearish on BRICS?

When the alliance first formed in 2001, many investors were bullish about BRIC, the association of what were then considered four burgeoning economies—Brazil, Russia, India, and China (South Africa joined in 2010). BRICS nations represent 40% of the world’s population and account for almost $16 trillion in GDP. The idea was that BRICS would create an international financial network that would rival the prevailing western-dominated system. But 15 years out, how much of a threat to the status quo does BRICS actually constitute?

Andrew LoAndrew Lo, Charles E. and Susan T. Harris Professor of Finance, believes that when it comes to BRICS, much depends on political factors. “The stability and credibility of BRICS governments is vital. If they can manage the volatility, including the threat of hyperinflation, and implement more disciplined monetary policies, it could be just a matter of time before they play a more important role.”

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Governing in an Interdependent World

Autonomy is so 20th century—at least in terms of governing nations. A half century ago, governments were relatively independent entities. They could make fairly autonomous decisions about their nations’ economic futures. MIT Sloan Senior Lecturer Otto Scharmer, a noted economist, sees a new world order today in which individual governments no longer enjoy the same kind of economic independence they once had.

OttoA world economy, Scharmer explains, is one in which capital accumulation proceeds throughout the world, while a global economy has the capacity to function as a single unit “in real time on a planetary order.” A world economy has existed for five centuries, he points out, but a global economy has been in place for only the last two decades, driven by new infrastructures built on advances in information and communication technologies.

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Tracking obesity with system dynamics

On the surface of it, obesity can be misunderstood as a rich nation’s disease.  After all, a glance at the World Obesity Map shows that in historically famine-stricken Ethiopia, obese women account for 1% of the population, while that number skyrockets to 35% for women in the United States. But obesity is every bit as much a cultural indicator as it is an economic indicator. In Sweden, undeniably a prosperous nation, the obesity rate among women is closer to 14%.


Professor Hazhir Rahmandad, MIT Sloan School of Management Visiting Professor, is using system dynamics (SD) to create a model to track and predict U.S. adult obesity trends and recently published his findings in the American Journal of Public Health. In the article, Rahmandad and his colleagues examine the energy imbalance gap (EIG)—an individual’s average daily excess energy intake minus the total daily energy expenditure. Rahmandad believes that the EIG is at the heart of understanding obesity. It’s an essential step, he says, toward the design of obesity prevention and intervention programs targeted at specific population groups.

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Can financial engineering cure cancer?

Like so many of civilization’s great conundrums, the quest for a cure for cancer needs more money. Drug development can take a decade and close to a billion dollars, so funders aren’t exactly queuing up to help commercialize innovations.

Andrew LoMIT Sloan Professor Andrew Lo and his colleagues have devised a revolutionary way of financing drug development through “securitized debt.” In an article in Nature Biotechnology, Lo and his coauthors Jose-Maria Fernandez, SF ’10, and Roger M. Stein of Moody’s suggest that a large megafund comprising long-term bonds issued by leading drug companies could help investors justify the funding of risky biomedical research.

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  Biotech  Finance  

The World Bank: Reinvention in response to global pressures

It’s common to criticize many of the world’s mega-organizations for being resistant to change, but reinventing large organizations—across borders, across cultures, across governments—can be a daunting feat. Nevertheless, the World Bank Group, with 188 member countries, is tackling an unprecedented reinvention in an effort to boost the organization’s impact.

0115-wassimyAs the Middle East North Africa regional manager for the Trade & Industry Competitiveness Program of the International Finance Corporation (IFC), the private sector investment arm of the World Bank, Hazem ElWassimy, SF ’09, is on the front lines of the historic transformation at the World Bank Group (WBG). For the last two decades, he has been working for and with multilateral organizations and government entities to generate investments and spark innovations that help countries modernize and expand economic opportunities.

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Cryptocurrencies: Is your wallet going digital?

It can be argued that money has been digital for a long time. The Bitcoincredit card, of course, is digital currency, and there are parts of the world—Scandinavia, for example—where consumers use credit cards for nearly every transaction, big or small, not bothering to carry cash at all. And innovations like Apple Pay mean you don’t even have to show your credit card. You can present your phone instead, which is linked to your credit card account. But perhaps the most controversial digital iteration is cryptocurrency, a digital currency that can be transferred directly from one “wallet” to another without ever going through a bank. What you get in lieu of paper money is a highly complex mathematical code. Your computer receives the code, solves the problem, and releases the sum from the “block chain,” a digital vault where the cryptocurrency is stored.

After a few hits and misses, Bitcoin and Dogecoin, the two major players in the cryptocurrency realm, have rendered their codes increasingly uncrackable. And Silicon Valley startup Coinbase has launched the first major exchange for online currency. Persistent hackers, however, have been able to decipher the encrypted strings of text used by less rigorous cryptocurrencies. Given that hackers—who are intent on proving that cryptocurrencies will never be fully secure—are continually finding vulnerabilities in the system, we asked MIT Sloan finance faculty whether this form of digital currency has a future.

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Using system dynamics to thwart counterfeiters

One of the hallmarks of system dynamics is its extraordinary flexibility as a problem-solving tool. Healthcare, education, poverty—MIT Sloan Fellows alumni have a history of applying system dynamics with marked success to a wide range of challenges. Now Graham Rong, SF ’06, has added thwarting counterfeiters to the list.

In a recent MIT Sloan Global Entrepreneurship Lab (G-Lab) project, Rong, Senior Industrial Liaison Officer at MIT, sat down to talk counterfeiting with a leading European company specializing in security products. The company wanted to produce a system for identifying counterfeit auto parts, a formidable global problem. In fact, loss from fraud in the auto parts industry exceeds $2B a year—not surprising when you realize that automotive manufacturers produce somewhere in the range of 200,000 different parts and that nearly 10 percent are being counterfeited.

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Leadership + Innovation = Progress

xoli-kakana-modalXoli Kakana, SF ’08, founded ICT-Works in 1999 with two outsized goals—to use technology to tackle tough challenges facing her native South Africa and to prove that women are major players in the technology realm. Her vision was inspired by a strong sense of responsibility for redressing the inequities of apartheid and was supported by her forward-thinking mom, who used her own pension payout to fund her daughter’s startup.

Kakana recruited like-minded codirectors with complementary skills—Margaret Sibiya and Sindile Ncala—making ICT-Works the first wholly black-women-owned and managed information and communications technology company in South Africa. ICT-Works now holds multi-million-dollar contracts and employs more than 100 people. The company has raised the standard of IT and telecom services in South Africa, and that success means that Kakana and her team can offer robust opportunities to women aiming to build careers in the technology sector.

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Reimagining government philanthropy in Switzerland

For a small land-locked country, Switzerland leads the world in a number of impressive metrics. It has the highest nominal wealth per adult in the world, for example, and both Zürich and Geneva rank among the cities with the highest quality of life. It’s also one of the most generous nations on earth with a philanthropic tradition that reaches back generations. In fact, the country boasts one of the highest per capita densities of charitable foundations on the planet—roughly 12,500, by one recent estimate. For Swiss Vice General Consul and swissnex China Executive Director Pascal Marmier, SF ’08, that rich philanthropic tradition is something to be treasured—but also challenged.

Marmier offers his country’s early adoption of public-private partnerships, or PPPs, as a case in point. “In Switzerland, PPPs represented a significant advance over traditional individual and foundation-based philanthropy,” he says. “PPPs enabled individual funders, as well as science and innovation agencies and universities, to expand their impact using the established infrastructures of government entities. Private foundations achieved greater democratic legitimacy as a result of public involvement, which increased the breadth and influence of their undertakings.”

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