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.

Organizational Development

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.

System Dynamics

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.

Marketing Science

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.