Inventing New Fields at MIT Sloan
MIT Sloan began with Alfred P. Sloan’s innovative idea that there was a close correlation between complex problems in business and those of science and engineering. Sloan, then chairman of General Motors, thought that the sort of research applied to the more technical fields could be applied to management as well.
That same innovation and thought leadership that formed the School continues to thrive today. A constant stream of new ideas, theories, and practices that have stood the test of time flow out of MIT Sloan. Many have become commonly accepted practices.
Douglas McGregor, who joined the Institute in 1937 as its first faculty member in the field of social psychology, compared managers' assumptions of human nature and the effectiveness of those managers. His Theory of X and Y has become a standard. McGregor, along with Professors Edgar Schein and the late Richard Beckhard, went on to create the field of Organizational Development during the late 1950s and early 1960s.
Schein credits Professor of Management Lotte Bailyn and John Van Maanen, Erwin H. Schell Professor of Management, with helping him to create the work-family-career development movement. While Bailyn has gone on to make work-life balance a specialty, Van Maanen has done much to legitimize the study of organizational culture.
Finance and Economics
The late Professor Franco Modigliani explained household savings-consumption behavior. Then, in the late 1950s, with Merton Miller, he also developed two theorems (the Modigliani-Miller theorems on corporate financing and valuation) for options pricing that provide analytical frameworks for understanding firms' capital structures. He won the Nobel Prize in Economic Sciences in 1985.
The Black-Scholes-Merton derivatives pricing model was developed by the late Professor Fischer Black and Nobelists Myron Scholes and Robert Merton. When the model was published in 1972, it fueled an explosion of activity in derivatives markets. As its basic methodology was extended to create other financial instruments, the billion-dollar financial engineering industry was born.
Jerome and Dorothy Lemelson Professor of Management and Economics Emeritus and former MIT Sloan Dean Lester Thurow, a visible economic pundit and commentator for more than 30 years and an early proponent of cross-cultural educational efforts, focuses on the impact of knowledge industries on the global economy.
Physiology of Trading
Andrew Lo, Charles E. and Susan T. Harris Professor of Finance, is analyzing the physiological and emotional characteristics that influence the financial decision-making process and exploring how these factors affect trading outcomes. Beginning with monitoring of vital signs of traders on the floor, Lo, working with Tomaso Poggio in MIT's Brain and Cognitive Sciences group, plans to monitor the brainwaves of traders as they transact deals.
Jay Forrester, Germeshausen Professor of Management Emeritus, created the field of System Dynamics, which incorporates human behavior components into multivariable economic models. He also invented random-access magnetic-core memory during the first wave of modern computers.
In the 1960s, Institute Professor John D.C. Little built models of marketing phenomena to help managers make better marketing decisions. “The first online marketing model was called a Geographic Model of the Urban Automobile Market, programmed by one of our master's students and published in 1964,” he says.
Building on the need for marketing data, in 1983 Little published what turned out to be a seminal paper on the importance of scanner data to manufacturers, based on a model that he and a graduate student created, which could predict future purchasing behavior based on past buying patterns.
In the mid-1970s, former MIT Sloan Dean Glen Urban launched his Assessor model, which predicted sales for packaged goods. More than 5,000 new products from giant companies such as Gillette and Lever Brothers have been tested using the Assessor model. Urban was also a pioneer in information acceleration, using computer technology to predict product success in future marketplaces.
“I knew about American business, but not enough about what’s really become a global economy. … You can read about it all you want, but there’s no substitute for being there and seeing the context and seeing how completely different these [other countries] are.”
“The conditions in the neighborhoods we were visiting were different than what we realized before getting there. Beyond that, what was surprising was that there weren’t surprises!”
“You could talk about watershed management and conservation of energy all you want. But until you put numbers to it and financial analysis to it, you’re not going to get much done. I came to business school to speak that language, speak with people in terms of numbers, financial numbers so that I can get projects done.”
“I can honestly say that when I was planning on coming to business school I never thought that witnessing the birth of a child would be included in the education. It was definitely an experience.”
"The relationships that we forged helped us to turn out a better project. We were able to test our hypotheses with the people that we spoke with every single day. And really, I think the friendships that you develop really propel the work that you’re doing."
“We are very much an action-learning environment. The way to learn leadership is not only through reading cases, not only through learning theory — in fact we don’t want people to regurgitate the theory. We want people to take theory and to live it, use it.”
“It was really rewarding that they wanted to know what we thought. We left there being fairly certain that they will do some of the things that we suggested.”
“Because of the diversity of our backgrounds, when we hit the ground in Tanzania it almost was a natural play where different people assume different roles.”
“[The India Lab] program is one of the reasons I came to Sloan. ... The hands-on learning that MIT offers was a huge differentiator.”
“At MIT Sloan you have a lot of opportunities to explore entrepreneurship. Especially in a place like Kampala where you have a lot of development, entrepreneurship can be very exciting.”
“We’re very interdisciplinary. Among the faculty in the group are an economist, a political scientist, a sociologist, and an industrial relations specialist. We’ve always made a big effort to be open to a variety of perspectives, but also to go beyond being open to them, to want to bring them in, because it makes for a richer environment.”
“The concept behind enterprise architecture is that you have all these machines, you have all these business processes, you have all these people doing things, how do you make sure they all come together and achieve business objectives that make you more competitive.”
“I love being in a place that is such a nexus of people and ideas — people coming to learn something new and to define themselves. Being a part of that process is a real honor and a real gift.”
“One of the reasons I came to Sloan was because I wanted to be at a top MBA institution worldwide. But I also wanted access to working with the latest innovations and the highest technology that was coming out of the MIT labs.”
“During the mid-1980s there were only five women faculty, and we used to have regular dinners together. The number of female faculty members has greatly increased since then, and students will have several of us for classes in the first year.”