The Rotunda


Daniel Kahneman, recipient of the 2002 Nobel Prize in economics


Nobel Prize award diploma

Paul Tudor Jones, Lee Ainslie, Julian Robertson, and John Griffin

"As you have heard me say on many occasions, the key to Tiger's success over the years has been a steady commitment to buying the best stocks and shorting the worst. In a rational environment, this strategy functions well. But in an irrational market, where earnings and price considerations take a back seat to mouse clicks and momentum, such logic, as we have learned, does not count for much."
              -Julian Robertson,     Founder, Tiger Management

THE Mcintire Center for Financial Innovation 
Mcintire Center for Growth Enterprises
Center for the Management of Information Technology
And
Miller Center of Public Affairs

Present
 The Fourth Annual Spring Symposium

Sponsored by
Blue Ridge Capital

Co-Chairs
John Griffin (McIntire ’85), President and Founder, Blue Ridge Capital

Jeffrey C. Walker (McIntire ’77), Vice Chairman, JPMorgan Chase

The University of Virginia
 Old Cabell Hall Auditorium
April 25, 2003

Featuring
Daniel Kahneman, 2002 recipient of The Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel 2002, 
Eugene Higgins Professor of Psychology, and Professor of Public Affairs at the Woodrow Wilson School of Public and International Affairs, Princeton University 


"[F]or having integrated insights from psychological research into economic science, especially concerning human judgment and decision making under uncertainty"

In 2000, the McIntire School of Commerce at the University of Virginia initiated a series of symposia considering the complex nature and origins of organizational success [1]. Previous symposia focused on the role of venture capital and private equity in creating and sustaining growth firms (2000), organizational factors facilitating the creation of “visionary” organizations (2001), and the role of creative organizational processes leading to innovative strategies appropriate to mature industry settings (2002). 

Organizations and their relative success or failure, their excellence or mediocrity, reflect the sum of the entity’s collective decisions over time. Within this context, the theme for this year’s symposium addresses the very foundation of organizational excellence—decision-making theory and practice. Our intent is to dramatize the critical importance of theory to enlightened practice, heightening awareness of behavioral traps and faulty decision approaches to practice settings that influence the path of societal progression. 

The research of Princeton University’s Daniel Kahneman and his colleague, the late Amos Tversky, of Stanford, inspired this year’s program. Their long collaboration produced the first compelling alternative to the “rational agent” model of choice under risk. Shortly after accepting our invitation as keynote speaker, Professor Kahneman received the ultimate academic recognition upon being chosen co-recipient of the 2002 Nobel Prize in economics. Their work has not only been extolled by the academic community, but it has also been influential and highly regarded in the world of practice. Noted financial historian and author/investment manager Peter Bernstein characterized it as follows: “The most influential research into how people manage risk and uncertainty has been conducted by two Israeli psychologists, Daniel Kahneman and Amos Tversky” [2]. More recently, the provocative author/investor Nassim Nicholas Taleb echoed this conclusion, characterizing the duo as “the most influential economists of the century, in terms of journal references, their followings, and their influence over the profession” [3]. Indeed, their research in uncovering behavioral anomalies to rational behavior sowed the seeds that led to the founding of a new field of study in financial economics known as behavioral finance. In addition to behavioral finance and economics, their work also directly influenced theoretical developments in political science, decision theory, consumer psychology, medical decision making, legal theory and practice, negotiation and conflict, and philosophical investigations of rationality and ethics. 

Professor Kahneman’s keynote address sets the stage from which to fully discuss behavioral influences on decision making and the impact of theoretical advances in applied settings. The morning’s discussions address the implications of behavioral finance for investment decision making and consideration of behavioral influences, corporate-level decisions, and enterprise risk. The symposium’s afternoon sessions are devoted to a broader societal setting, assessing behavioral influences on the theory and practice of foreign policy decisions. In each applied setting, theoretical advances frame the realities faced by practitioners. Discussions among well-tested decision makers of this work should prove both provocative and informative, particularly upon comparing differences inherent in the applied reality of each domain or decision setting. 

After Professor Kahneman’s keynote address, a panel of extraordinary investors/decision makers probes the impact inherent in the triumph of behavioralists [4], describing their experience in avoiding behavioral traps and suggesting the most appropriate decision practices. The session includes Paul Tudor Jones (A&S ’76), renowned Wall Street trader and Founder and Chairman of Tudor Group of Companies; Julian H. Robertson Jr., a key figure in the hedge fund industry’s evolution and Founder and Chairman of legendary Tiger Management; and Professor Kahneman. McIntire’s own legendary investor, John Griffin (McIntire ’85), President and Founder of Blue Ridge Capital and Visiting Scholar of Finance, moderates the discussion. 

The morning program’s third session extends the discussion to decision making at the corporate level. The discussion considers opportunities to balance intuitive and analytic approaches to decision making and behavioral issues associated with corporate governance. Discussants include David B. Patteson, President and CEO of Biotage Inc. and Executive Vice President of Dyax; Charles H. Turner (McIntire ’79), Executive Vice President and CFO of Pier 1 Imports; and Jeffrey C. Walker (McIntire ’77), Managing Partner of JPMorgan Partners and Vice Chairman of JPMorgan Chase. McIntire’s Bill Shenkir, William Stamps Farish Professor of Free Enterprise and co-author of Enterprise Risk Management, moderates this discussion.

After lunch, discussion of behavioral influences on decision making is extended beyond the commercial realm to a truly macro setting or domain—the nation state and foreign policy decisions. Analogous to business strategy decisions, explanation and prediction of foreign policy decisions and outcomes depend dramatically on the theoretical lens through which historical events are viewed. Philip Zelikow, White Burkett Miller Professor of History and Director of the University of Virginia’s Miller Center of Public Affairs, assesses the difficulties inherent in understanding and forecasting outcomes of crucial foreign policy decisions [5]. Professor Zelikow, on leave from his teaching duties at the University of Virginia, is currently serving as Executive Director of the National Commission on Terrorist Attacks Upon the United States. 

After the Zelikow presentation, we turn to a discussion centered on public policy decision making, with particular emphasis on the role information plays in crisis situations. Given the public/private nature of this set of international resources, government faces an ambiguous and complex decision landscape. Clearly, decisions concerning national and international security problems are among the most crucial issues facing our nation. Professor Zelikow moderates an outstanding panel that includes Columbia University’s Richard Betts, Arnold A. Saltzman Professor of War and Peace Studies; Douglas MacEachin, former CIA Deputy Director for Intelligence; and the University of Virginia’s William Quandt, Edward R. Stettinius, Jr. Professor of Politics and former member of the National Security Council Staff (1972-1974, 1977-1979). Each brings experience in government and a theoretical perspective of the academy. 

The benefits emanating from the symposium series have been significant, including the discussions, both formal and informal, stimulated by insights from a series of outstanding, articulate scholars and scholar practitioners. The output of these events has informed and inspired student activities and professional choices, faculty research and teaching, and managerial behavior within the circle of alumni and friends who have participated. More important, they have served as catalysts—rekindling old friendships, inspiring our daily lives, and positively modifying our intellectual approaches to life. Importantly, they have made us reconsider the significance of Mr. Jefferson’s University in our individual lives and the vitality of the nation.

The symposium is held during Historic Garden Week in Virginia and precedes the Foxfield Races Saturday, April 26, 2003. Other events happening that weekend include a Lecture and demonstration by Bill T. Jones, dancer and choreographer.  An afternoon reception will be held at Pavilion VII, the Colonnade Club, at the close of the symposium. 

[1] For a discussion of this rather broad theme, see John Kay, Why Firms Succeed, Oxford University Press, 1995, v-vi. Kay measures corporate success by the presence of corporate value added or the present value of excess returns above the firm’s corporate cost of capital. Kay argues that corporate success, as measured by value-enhancing growth, stems from effectively matching a firm’s external relationships to its distinctive capabilities. Within this same financial frame of reference, we define a growth enterprise as one that combines dynamic growth with value-enhancing returns, thereby optimally enhancing shareholder wealth. 
[2] Peter L. Bernstein, Against the Gods: The Remarkable Story of Risk, John Wiley and Sons, 1996, 270.
[3] Nassim Nicholas Taleb, Fooled by Randomness: The Hidden Role of Chance in the Markets and in Life, Texere, 2001, 157.
[4] See Justin Fox, “Is the Market Rational?” Fortune, Dec. 9, 2002, 120.
[5] The Rational Actor Model dominates current theory and practice. Yet, Graham Allison and Philip Zelikow conclude that “(it) alone will not do. Multiple, overlapping, competing conceptual models are the best that the current understanding of foreign policy provides.” See Graham Allison and Philip Zelikow, Essence of Decision: Explaining the Cuban Missile Crisis, 2nd ed., Longman, 1999.

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