Agralogics calls itself the “Internet of Food” company. Based in Sunnyvale, CA, Agralogics helps farmers by providing them with detailed analytics about their crops – information about everything from weather, thermal energy, soil quality, pollination, and much more. The firm is a unicorn of sorts in Silicon Valley, where tech-driven innovation in agriculture is secondary to flashier, consumer-facing products.

The DBJ sat down with co-founder and CTO Sanjay Dayal to learn more about Agralogics and the food ecosystem.

Dartmouth Business Journal (DBJ): Tell us about the data you collect.

Sanjay Dayal (SD): We look at data not as a means to an end, but almost an end in itself. First, we take data from the public domain. There’s a lot of data around satellite imagery, weather, soil, crops, pests, plant phenologies, growth stages, and much more.

Then there is partner data. There are sensor networks, which are generating an amazing volume of data, at increasing velocity.

Then there is private data, which comes from our customers. This could be collaboration noise or ‘chatter’, it could be how much water they applied, or how much pesticide they are using.

We can see that there’s an explosion of data. Whenever there’s an explosion, there is blindness. Despite so much data being produced, it’s not actually making things clearer. Because of the volume of data, you don’t know what’s relevant and what’s not.

To give you an example, there are soil sensors, which can tell you about 160 different characteristics of the soil. How do you map that to what is relevant to your crop production at different stages? It’s a hard problem. The simplest way is to do a linear regression, try to find what’s important, and then do some kind of closed loop sampling. But it just doesn’t work, because next year, the temperatures are completely different.

So I think what is needed is not necessarily giving data to our customers, but really giving them context.

I’ll give you another example. The CDC does flu modeling. It says “this is how flu is going to spread.” Google does that simply from its users, who are doing searches on ‘flu’. It can actually find out how the flu is spreading better than the CDC, just by looking at searches in different parts of the country. Data has a lot of insights, but just data itself is so much that for most people. It’s unusable. What we do is extract context from it, and then provide that context to our customers.

“Data has a lot of insights, but just data itself is so much that for most people, it’s unusable.”

DBJ: With data coming from the government and sensors, do you foresee problems with expansion in areas where that infrastructure doesn’t exist?

SD: We are very agnostic of where the data comes from. We are not dependent on the data coming in a specific format. We have built our backend to consume as much or as little of the data as is available. If we only get data on high and low temperatures, we will consume that and extrapolate other characteristics. But then there are weather stations which not only give you highs and lows, they give you surface temperature, humidity, wind speed, all kinds of stuff. And that type of data is pretty much available for most regions in the world.

There are at least eight or nine public domain satellites which give you reasonably high resolution data for the entire world. More and more, people are also moving towards putting sensors in their soil. And there’s a lot of math in the background. For places where you don’t have these things, we can do a first-order or second-order approximation.

Now, as more accurate data is available, we can improve our model, and our ability to predict. For regions you don’t have data, you do sampling and then modeling. For regions you have more data, you are more accurate.

I would say that for 90% of the globe, most of the basic data is available. And since this is just the start, we believe that in 10 or 15 years, because of the pressures of global warming, population growth, and unpredictability of weather, we will have more and more precision, which we’ll need when it comes to how we produce, distribute, and consume our food.

So I think your question is very valid in that there are regions where data isn’t fully available, but there are workarounds.

DBJ: Suppose I am a farmer, and I say “My family’s been doing this for generations, I don’t need anyone telling me how to grow my crops.” What would you say?

SD: We are not trying to tell you how to grow your crop, because we know you do that much better than us. But what we can do is make your life easier. Things that you need, the information that you need, we can provide readily to you, on any device you work with.

What crops do you grow, and where do you grow them? It’s a mathematical problem, basically. But the variables are so many, and the volume of data is so large, that individuals cannot do it. It’s not only about how much water you put in, it’s also about the other things. Is my land too wet or too dry? What phenological stage is my plant in? If you’re spraying a chemical the week before flowering, your flowers may not pollinate properly. Things like that are very contextual. Growers know about these things, but we want to make this information so easily available that they do not have to work for it.

Here’s an example. Food production doesn’t happen on Gregorian calendars. You cannot say, “I have planted my tomatoes in April, so I will get a harvest on the first of August.” Tomatoes don’t grow that way. Tomatoes grow based on how much thermal energy is given to that plant. If it’s colder, it will take longer. If it’s hotter, it will take a shorter period of time. You might have heard of the Pennsylvania groundhog, Punxsutawney Phil, which people use to predict whether the winter will be short or long.

And guess what? Most farmers have this clock in their heads today. They say “March is warm this year, so I think I should plant early, because this year kind of resembles how it was four years ago.” They are all working in their minds. What we can do is give them a calendar based on a thermal clock. This tells them that in two months time, this much thermal energy will be given to your plant. And this amount of thermal energy looks like what you got three years ago.

Just that information is very important for the farmer to say “I’ll do what I did three years ago, because I had a great crop that year.”

A lot of planning in the farm happens around when it is hot or not, when it has rained or not rained, how much water has been given to my soil, both by nature and by me? How is the soil losing water, because that determines when I need to water my plants again. All of that is done by heuristics, and because conditions change so fast, your past wisdom may not be applicable to your current situation.

What we can do is help by doing a large-scale analysis of, for example California, and understand how water availability is changing based on reservoir levels, aquifers, etc. We can predict that, and tell a farmer, “these are the new areas that you can expand,” if their current areas are becoming less productive. All of that is very data-driven, and that’s where we think we can help the entire food ecosystem.

The biggest problem for today is that people work for data – data doesn’t work for them, especially in the food ecosystem. We want to turn that on its head.

DBJ: Do you think Agralogics will get to the point where its technology can predict a drought, or a massive crop blight?

SD: Absolutely. I think some of that work is already done by some companies. You might have heard of Climate Corp. Their claim to fame was that they could provide rates for crop insurance based on the weather.

What we have is not only weather-based data, but we have soil data, private data, management practices. The combined data is a much better predictor of success than just the weather. In a few years, I think we’ll have enough statistically significant data worldwide that our system could start to approach that problem.

Right now we’re focused on California, which provides a great sample. We have customers from 24 different crops, across all counties, using our platform. We can actually, in an anonymized way, what’s happening in their fields, both from remote sensing and their private data. From this, we can make larger scale predictions. We’re not there yet, because we need more data. But I think we’ll be there soon.

DBJ: In this day and age, data privacy is very important. But without using private data, is it possible to make such predictions regarding droughts and other phenomenon?

SD: All private data is never shared with anyone else. This is like Google doing an anonymized analysis of your Gmail, but not sharing those contents with anyone. It’s in a very similar spirit, where we only use anonymized data from our customers for our analysis.

Coming back to your first question, ‘can this be done with only public data?’ It can’t. That’s why Google has the public data, but they can’t do it. There is no feedback loop telling them that their analysis is right or wrong. It’s like a scientist only having theories that they can’t test.

So it’s very important to have that private data.

DBJ: You mentioned ‘chatter’. Could you elaborate on that?

SD: When we talk about data, we aren’t just talking about ‘transactional data’, such as how much water or pesticide I used. It’s also about how you came to the decision to apply this much water, what ‘chatter’ happened prior to that decision. Think about a decision to apply a certain amount of water being a communication between the ground staff and the field supervisor. We want to capture that chatter, and see if there was a better way to collaborate. Because unless you optimize that process, the outcome will always be suboptimal.

It’s not just about what happened, but also how it happened.

Around that, we are creating collaboration. So think about a Facebook wall, where field staff collaborate with everyone else around pesticide management, land management, pollination, and the food supply chain. Collaboration between the grower and the processor. Collaboration then between the processor and the distributor. It’s a highly connected ecosystem.

If you look at the food graph, it is superconnected. It is more connected than Facebook. Facebook is a relatively uniform graph, where each person has around the same number of friends. The food graph is much more connected. The way the farmers are connected to consumers: it’s not six degrees of separation. It’s sometimes two degrees of separation,  sometimes 10 degrees of separation. So the graph complexity is pretty high. And these are not reciprocal relationships. So once you look at the graph and say, my god, this graph has to be the basis of any information flow and understanding, you come to that “aha” moment. It’s the data and the ‘chatter’, in the system which needs to be captured first, in order to optimize what’s going on.

DBJ: What has been Agralogics’s biggest challenge?

SD: Every startup has some basic challenges that all startups face. Having a startup is like having a baby. I have two, so I always compare them. Besides the work, it is a lot of faith. You need to believe that what you’re proposing has value. Most of the time, that value is not seen immediately. There is a lot of that effort and proselytizing you have to do, for people who are the change makers, to see that value.

When you try to drive something as big as what we’re trying to do, you cannot do it alone. We need the opinion makers, the people who can make things happen, to be on our side. And we believe that it has to be a much bigger effort than who we are – a tiny little company.

Especially for Agralogics, I see that as a big challenge. We are not trying to come up with a better algorithm to match consumers with products. We are trying to disrupt the food ecosystem. There are very powerful stakeholders who we have to work with, and convince that what we are proposing is good for all of us. And that’s definitely a challenge. We will continue to do that because we believe in this.

DBJ: Where do you see Agralogics in 10 years? or maybe 5 years?

SD: Where we want to be is a ubiquitous platform for anything related to food collaboration. Collaboration can be as simple as the ability of a food processor to inform its customers about what is in their food. For example if there is a pesticide scare, I as a consumer should be able to scan my label, and get a response saying that this particular product is completely free of pesticides. Or the label should be able to tell me exactly how many miles away this was produced. Or it should be able to tell me its actual nutritional content. Today, an apple is an apple is an apple. It doesn’t matter whether it’s an organic apple, whether it grew in rich soil, or whether it was a hydroponic apple. You get the same nutrition information for all of them today. So that is one type of collaboration, where the consumers want to find out information about food.

The other type of collaboration is that which enables growers to grow their crops more optimally. Suppose a bank is trying to give a loan to a farmer, and they want to understand their risks. Right now, the farmer would have to submit documents, monitoring of his fields. The bank guys have to physically visit the fields to make sure the crops are growing.

And then there’s a predictive side of it. Based on all this data, we can start to help countries, financial markets, future markets, to plan better on how to grow food and feed humanity.

But unless we have the data, we’ll never get there. So our first phase is to make sure that the platform is ubiquitous, or at least used by enough people, and enough stakeholders in the ecosystem, that we can go to our second purpose, which is to plan at a much larger scale, at a county, state, national, or even continental scale.

DBJ: That’s great, because my last question was going to be you see any humanitarian potential for Agralogics?

SD: That’s what drives us. It’s a big dream, but all big dreams start small.

DBJ: Is there anything else you wanted to mention Agralogics?

SD: We are about a year old company. One thing I would say is that there are some visionary investors. We are just a seed stage company right now, but we already have some of the most visionary investors in Silicon Valley, who are willing to part with some of their money in pursuit of this dream, which is very satisfying, because sometimes me and [my co-founder] Soumesh say to ourselves ‘We’re not smoking dope, are we?’, and when there are so many very smart people willing to help you, then I think it’s a confirmation that it’s some good stuff. Support of people who are influential is what I believe is the key for doing something at a scale of the problem that we’re trying to address. So far, we have had very good encouragement from people who are the fathers of the Silicon Valley.

Now we have customers, who have validated our solution. Most of the customers we have presented this to are wowed. They tell us that “we were waiting for something like this.” We are very happy to report that there is a strong adoption that is happening as we speak.

DBJ: You’ve worked at startups before. How is it different as a co-founder?

SD: The startup journey is very challenging. This is my first startup as a founder, but I have done two more startups before this. One of them went public, and one of them busted. Then I was at Sybase in its very early stages pre-IPO. I have seen phenomenal successes, and phenomenal failures, but mostly from the eyes of an employee. This time, I am seeing things from the eyes of a founder, and it’s very different. But it’s very exciting. Because that ability to pursue a dream, and seeing the milestones, is more satisfying than anything you can imagine as an employee. The only other feeling better than this was the birth of my sons. It’s at that level.

DBJ sat down with Karen Hoguet, the chief financial officer of Macy’s since 1997. She joined the company in 1982 as a senior planning consultant. Since then, Hoguet has served in a range of positions including treasurer and senior vice president for planning. Hoguet also sits as a board member of Nielsen Holdings NV and The Chubb Corporation. She is a graduate of Brown University and received a master’s degree in Business Administration from Harvard University in 1980.

Dartmouth Business Journal (DBJ): What lessons did you learn from your education that impacted your leadership skills?

Karen Hoguet (KH): In business school, the most valuable lesson I learned was how to work with people of all different backgrounds and perspectives. It was my first exposure to group collaboration. In college and high school, there were far fewer group projects than there are today. I learned that in a team, you can get a lot more accomplished than working by yourself.

DBJ: What did you learn during your summers in college?

KH: After my freshman year of college, I worked for my grandfather at Leshner Corporation by processing invoices in the accounting department. I learned a lot from my grandfather. By working for my grandfather, I observed his sincere care for the people who worked for him. His relationships were not artificial or aristocratic. He treated people fairly and with concern, and his employees in return were very loyal.

My grandfather and father were my business role models. They taught me that business is all about people and if you don’t genuinely like being with all kinds of people and don’t genuinely care about others, business might not be the right career. This has impacted my leadership style to this day.

After my sophomore, junior, and senior year, I worked for my representative in Congress, Bill Gradison. My main job was to compute all of the electoral statistics for the campaign, and I loved the statistical work, but was less interested by the policy side.

DBJ: Did you receive any feedback about your management style over the years that led you to make an adjustment?

KH: In 1987, I was identified as a “high potential” candidate at Federated Department Stores (the former name for Macy’s Inc.). A “high potential” candidate was somebody that senior management believed would rise to senior levels in the company. I was assessed for my intellect, leadership skills and ability to work with people through a combination of interviews and tests. Throughout this process I got a lot of advice that I use to this day. I remember being criticized for not being patient with people who might not have been as quick as me, and that I needed to learn how to tolerate this through patience. Over the years, I have grown to appreciate people who are not book-smart, but talented in any other ways, and who can do things I could never do. I have not completely fixed the problem, and I should still be a little more patient, but it has been one of the most important lessons I have learned, and one that I think about every day.

A lot of my learning has been through observing people that I respect. There is not one successful leadership style; everybody is different. You need to have a style that works for you.

DBJ: What are the most important qualities of a highly effective leader?

KH: Integrity, confidence, sensitivity, and communication. A good leader cannot do a good job without being highly capable. However, capability by itself is not sufficient. You have to be able to communicate effectively to peers, superiors, and inferiors. Modification and simplicity is important. There is a common saying that “the boss gets what the boss wants”, but you have to be very clear about what you want.

DBJ: When you speak to college students, what career advice to you give them?

KH: One important thing is to always work hard. Younger generations always think of careers as being fun, but if it was all fun companies wouldn’t pay you. It is also important to know yourself. Just because investment banking is prestigious, it doesn’t mean it is the right career for you. When I left consulting, I took a significant pay cut but I haven’t looked back since. Patience is also a very important virtue. Everybody thinks they are ready to get promoted before it happens, and sometimes you might have to wait a few years. It is important to bloom where you are planted. Too many people are constantly looking for the next job or promotion, but if you focus on excelling at your current job, you will most likely end up being recognized for your effort.

Lastly, look for careers where you will be able to have fun. If you don’t enjoy what you are doing, that is a problem.

DBJ: How has your leadership changed throughout your career?

KH: Becoming a mother has made me a better worker and a better leader. You realize that you cannot control everything and you need to deal efficiently with time management – being a parent is a very humbling task. As a result, I have become more tolerant and patient, and I recognize that there are some things you can’t control. As a mother, you want your kids to achieve the most they can achieve and to be happy. This is analogous to leading a team, where you want to help your team achieve its full potential.

DBJ: How do you hire? What questions do you ask?

KH: I try to spend time getting to know the person I am interviewing, and do not have a list of set questions. I like to hire people with passion and commitment. It is important to find out what interests them, and how they have made decisions over the years.


Walt Sosnowski is an economist at heart.

He’s a hedge fund manager whose fund beat the Standard & Poor’s 500 Index by more than fifty percentage points in 2008, while the rest of the investing world, still reeling from the United States credit crisis, struggled just to stay afloat.

He’s a Buffet-esque value investor. He’s a ruthlessly rational analyst of companies. But his greatest strength is his ability to apply sound economic principals to the playing field where irrationality rules the roost: the stock market. And a fundamental concept of economic theory motivates a big part of Sosnowski’s thinking: sunk costs.

According to Sosnowski, the intelligent investor is the one who ignores his or her past performance and makes sober, emotion-free investing choices. “What’s the right decision today?” Sosnowski asks himself before every investment. “You’ve got to be thinking about the next thing – not what just happened, but what’s going to happen next.”


“Investing is not for you.” Sosnowski vividly recalls balking at those entirely un-prophetic words his guidance counselor told him as a high school junior.

Told that his skills would be better suited if he became an engineer, Sosnowski went to Stanford two years later – and, further ignoring advice, immersed himself in the likes of St. Augustine, Aquinas, and Luther.

Recognizing that he eventually wanted to go into business but knowing that his true love was for history, he earned a history major, specializing in Renaissance and Reformation history and taking a senior study course on the Russian Orthodox theologians. He sprinkled the remainder of his schedule with classes in accounting, finance, and engineering.

Business history has struck his fancy of late. But Sosnowski’s background in history of all kinds has become much more relevant as he’s grown older, he says. “We’re going to a stage in world history right now where really understanding where nations and economies have been the last few hundred years will be important,” he says. “There are some profound changes going on in America, in Europe, and in Japan right now. “There are always changes going on. But I’m talking historical changes.”


Sosnowski never doubted his own aptitude as an investor. Other barriers to entry – the long, painful transition from one industry to another, the often-draconian regulations imposed on beleaguered managers, and myriad other obstacles – prevented Sosnowski from launching his own fund before he was forty.

Fortunately, Sosnowski surrounded himself with people who knew a natural hedge fund manager when they saw one. One day when Sosnowski was in his late thirties, the guy in the office next door, a financially shrewd Dallas lawyer and a recent acquaintance of Sosnowski’s, walked into Sosnowski’s office. “Why don’t you start your own fund?”

Before Sosnowski could utter three syllables about how he didn’t have any investors, he was forced to reevaluate. “I’ll put in $150,000,” the lawyer said.

Sosnowski’s friends weren’t the only ones who saw his talent for investing before he did.

Though naysayers like the evaluator of his aptitude test pushed him away from it, investing intrigued Sosnowski from the start. He bought his first stock as a high school freshman in 1979. But it wasn’t until he was a 26-year-old real estate agent that he had enough cash to start to invest.

So he started researching companies – researching with the same passion that sports enthusiasts pore over major league batting statistics. With no Internet to expedite the process, Sosnowski would order hard copies of 10Ks, 10Qs, and annual reports on companies he was interested in. When other twenty-somethings were as far as could be from financial statements on nights and weekends, Sosnowski found himself analyzing companies.

And then the light bulb went off. “One beautiful Saturday afternoon, when everybody was out running around and having fun, there I am analyzing some company. My wife walks in, and she goes, ‘What are you doing? Can’t you get paid for doing this?’”


The decision to become a full-time investor was easy. The choice to start his own fund was not. Sosnowski admits he has always had an entrepreneurial streak. When he was twenty-five, he’d tried to start a commercial real estate information firm from scratch. “Good idea, but I was undercapitalized,” he says.

With his nascent hedge fund, capital wasn’t an issue. The lawyer who had volunteered to be his first investor helped him find others willing to contribute to get the fund off the ground.

Next on the list was to define his fund’s strategy. This was the part that, consciously or not, Sosnowski had been planning for years.

Sosnowski’s fund runs a long-short equity strategy. But really, Sosnowski’s formula for beating the market is simple: he does more research than the other guys. Still, every investor has to have a couple of guidelines he follows when deciding whether or not to invest in a company. Right?

“There aren’t three top criteria,” Sosnowski explains. “There’s anywhere from ten to 200 criteria. My job is to figure out which of that huge amount of criteria are the two or three key issues. That’s part of the key to investing: to ignore the stuff that’s noise and to figure out what the important things are.”

Figuring out how to value a com  any is the basis of any value investor’s strategy. Sosnowski looks at valuations in a number of ways. First, he looks at a company’s price to earnings, or P/E, ratio. “But there’s different kinds of P/E,” he says. “There’s GAAP earnings, and there are different ways one can adjust GAAP earnings to look at what I call ‘Earnings 2’ and ‘Earnings 3.’ ‘Earnings 2’ backs out amortization of intangibles and some other things, like one-time items – true one-time items. And then ‘Earnings 3’ also backs out all that plus 123R, which the expensing of stock-based compensation.

“So I’m looking at different types of P/E ratios, I’m looking at different enterprise value to EBITDA, I’m looking at free cash flow.” But Sosnowski’s analysis doesn’t stop with the individual firm: supply and demand industry fundamentals, the competency of management and analyses from sell-side analysts weigh heavily in Sosnowski’s opinions of the companies he examines.

And Sosnowski isn’t one to abandon his roots: as his history background taught him, he never stops his research without finding a primary source. Secondary sources – in this case, sell-side analysts – are great, but there’s nothing like talking to the CEO or the CFO of the company he’s examining.Like most fund managers, Sosnowski is a numbers guy. He knows the financials of the companies he invests in inside and out.

But he’s not the stereotypical quant. “At the end of the day, these companies are run by people,” he says. “You’ve got to make judgments about the competency of the people running [the companies], their understanding of their business and their industry, whether they’re conservative or promotional, whether they’re trustworthy.”


“This business is very humbling,” Sosnowski admits. “Just when you think, ‘Oh, I’m smart, I’m doing really well,’ then here come the mistakes.”

According to Sosnowski, too many investors let what they could’ve, would’ve, should’ve done lead them to believe they’re wiser than they are. Rational discipline, not wishful thinking, bodes for success in the market, he says.

Sosnowski gives an example. “A stock’s down twenty percent, and there’s a fundamental reason,” he says. “Probably, the stock’s not been doing well because the fundamentals are eroding. Too many investors go, ‘I could’ve sold it three months ago for a higher price, so I’m going to hold on until it gets back up. Conversely, let’s say a stock is down twenty percent, and you’re angry. A lot of investors just puke it out.”

According to Sosnowski, both of these reactions are incredibly common but equally misguided. And no investor – even him – is completely immune, he says: “Even many highly educated people have trouble drawing that distinction.”

Sosnowski also sees many investors whose inflated perceptions of their investing abilities lead them to believe they know far more than they actually do. “How many times do you say, ‘Well, I knew that was going to happen’?” he asks. “Well, did you invest that way? ‘No, I didn’t.’ I can’t count how many times I hear that. “ Over time, Sosnowski says, investors who recognize their actual knowledge – and who aren’t falsely influenced by the investments they merely considered making – will come out on top.

Full disclosure, my father is an investor in Sosnowski’s fund. Sosnowski would not discuss his performance history with me, but I was able to see his annual results in the reports my father receives. In 2008, when the market was in a free-fall, Sosnowski’s fund beat the indices by more than fifty basis points – this coming after a year when his fund posted a return of forty-six percent. He followed his 2008 market-blistering year with a fifty-seven percent return in 2009.

When questioned on these results, Sosnowski demurs. Of all the traits that make Sosnowski an outstanding investor, perhaps humility is the one that best allows for his long-term success.

Sosnowski shakes his head. “Past performance is not indicative of future results.”

Professor David Blanchflower is an internationally renowned labor economics and a Bruce V. Rauner professor at Dartmouth. In addition to his extensive work in the areas of unemployment and the economics of happiness, Professor Blanchflower was a member of the Bank of England’s Monetary Policy Committee between 2006 and 2009, and is often credited with accurately predicting the scale of the European financial crisis. He was kind enough to talk with DBJ and share some of his thoughts on his book, his research on happiness, and the financial crisis.

Dartmouth Business Journal (DBJ): As a leading economist in the field, where did your interest in economics originate?

David Blanchflower (DB): I actually started doing economics when I was at school. I discovered it was something I liked and could do. In England, you specialize pretty early, so I did an economics degree in high school, university, and then I taught in a school and realized that I was interested in unemployment—youth unemployment. I went back, did a masters, [got a] PhD degree, and became a labor economist. Not least because I was interested in some of the big events that I saw particularly in the 80’s around the world…big growth in youth unemployment, which I hoped had gone away but now it has come back again. My interest was in trying to solve unemployment and trying to think about the real world and do practical things in the real world.

DBJ: What exactly about unemployment interested you? Was it because it’s a general problem or was there some other motivational factor?

DB: It’s a really hard problem, it turns out. Many people have tried to work on it, people have just been awarded Nobel prizes for studying it, but we still don’t understand it. Why are certain people unemployed? Why won’t unemployment go away? What’s the impact of unemployment and the social and economic losses concerned with it? One of the things I’m especially interested in is how unemployment is scarring. [We have evidence] that unemployment spells in the 80’s and 90’s, when people were 20, continue to hurt them 30 years later. We can show that when you have particularly long spells of unemployment when you’re young, and you don’t make the transition from school to work, your wages later in life are lower, your health is worse, and the likelihood that you’ll be unemployed again is higher. So the loss to you and society is big. The other interesting thing is that if you enter the working world during a recession, your lifetime earnings are lower. I think we should be doing things about that because it’s not peoples’ fault.

On unemployment, the other thing I’ve done a lot of work on is happiness. Spells of unemployment everywhere make people really unhappy, by a lot. People have asked, is unemployment voluntary or involuntary, and it turns out it doesn’t matter…unemployment makes people unbelievably unhappy by a lot.

DBJ: Can you talk about your research or work like the economics of happiness and your book The Wage Curve?

DB: Work on the wage curve is about understanding some facts in the data. I’m a data person. I’m interested in trying to find statistical, empirical regularities–patterns–in the data because that’s what a science should do. After doing lots of research across countries and time, we found that there was a strong pattern in the data that said wages and unemployment were negatively correlated and that was called the wage curve, and it says stuff about what’s going on now.

DBJ: So you wrote The Wage Curve a few years ago and now it has significant relevance. Can you elaborate?

DB: Roughly, what the wage curve says is that if unemployment doubles, say from 4% to 8%, real wages will fall by about 10%. If you look at the US since the start of the recession, roughly unemployment has doubled and real wages have fallen by about 8.5%, so we were pretty darn close. An economist would say a wage equation is the same everywhere.
It turns out when you look at happiness, the happiness equation is also the same everywhere. But what’s really interesting to an economist is that happiness has not risen in the US since 1975. In developed countries it has. But happiness levels today in the US are approximately the same as they were in 1975. Now that’s intriguing to researchers. So relative things matter. Basically if I get a BMW and you don’t, that makes me happy. But if I get a BMW and you do too, my happiness doesn’t rise because you got one too. So we’re interested in relative things. National happiness has not risen even though income has risen.

DBJ: How do you define happiness? How is economics applied to happiness?

DB: I will answer this in a number of ways. If you think about what a macro policymaker does–and I was a policymaker–the three things that you care about are inflation, unemployment, and growth. But you can’t eat those. They aren’t things we actually care about in the sense that they’re intermediate goods. And ultimately what we actually care about is well-being, some measure of utility. If unemployment’s low then we’re doing okay, if inflation’s low we can buy cheap stuff and our standard of living is higher, and if we grow, we’re doing better. People worry about how you measure happiness. And a first order answer is that it doesn’t really matter. You ask people. How happy are you on a scale from one to ten. It turns out that’s quite good. It’s very correlated with life events. Unemployed people say they’re unhappy. That happens all the time. If I ask how happy you are, I can validate it by asking your friends how happy are you. I can ask your mother, your spouse. That’s one thing you can do. It turns out happy people smile more, called the Duchenne smile. There are physical things you can look at like the brain.

DBJ: Can you describe your experience with the Monetary Policy Committee and the Bank of England? What you did there in the beginning and then towards the point when you predicted the financial crisis?

DB: I went there first in mid-2006. I hadn’t applied for the job and I wasn’t a monetary economist. It was an appointment by the Chancellor of the Exchequer or the prime minister of Britain. There was quite a lot of controversy about the fact that I wasn’t going to give up my job at Dartmouth; I said I’d take leave and commute.

When I first went over there, there was a lot of disagreement about how to think of the world, and I essentially thought that a lot of the stuff that was happening in the US was going to subsequently happen in the UK. But they believed in decoupling, which was that America was irrelevant. And I said, “Oh no, that’s such hogwash.” I always had it in my head that when the US sneezes, the rest of the world catches a cold.

And that was what happened. As the US started to go into recession, the data started to weaken. Eventually, the housing market collapsed, the labor market collapsed. The US went into a recession in early ‘07, with output starting to fall in ‘08. And then the UK and Europe followed almost exactly the same path perhaps six to nine months later. People in the UK didn’t notice it, but I did. And I kept saying, “Something horrible is going to come out of the financial markets,” and that was exactly what happened. By August 2008, I started voting for cuts in rates. The one big one, which I am now remembered for, is called the Blanchflower cut. I basically said we have to cut by at least 150 basis points, which was the biggest cut ever. Then we cut by 100 and then another 100. We had rates down, and we turned to quantitative easing.

The Bank of England did the right thing, but I think it was the Fed, Ben Bernanke, and monetary policy that saved the world. I think Gordon Brown saved the world as well because he coordinated a fiscal stimulus across the G20 of a trillion. You can’t forget Alistair Darling of the UK either. He rescued RBS and Lloyd’s. People are often unaware that the failure of RBS would have been much, much greater than Lehman’s because in terms of assets, RBS is one of the largest banks in the world.

I asked Alistair in a TV interview, “How close to Armageddon did the world economy come?” He said 3 hours. If they hadn’t saved RBS in the morning, it would have failed in the afternoon. I tried to understand the implications of that, but the thoughts were too awful. I think stock markets and cash machines would have closed around the world. I think we would have seen the stock market falling by 50%. Banks everywhere in the world would be closing. And Ben Bernanke thinks unemployment would have gone up to 25%. It literally would have been “Financial Armageddon.”

That’s what we avoided. People have underestimated the scale of the shock, but when you talk to central bankers around the world–like me, Mervyn King, and Ben Bernanke–we saw and all think we came very, very close to the most enormous collapse. If we hadn’t acted in the way we did…

DBJ: A few questions about the European sovereign debt crisis. What was the main cause?

DB: I think the main cause was that countries especially were able to borrow money at very low rates. They didn’t put their fiscal house in order, and they were accepted as a member of the EU for political reasons. That lowered the cost of borrowing in boom times, but always the worry was what was going to happen in the bad times. The UK under Gordon Brown went through a long period of deciding whether it should join, but basically for these reasons decided not to.

The problem is that you have your own central bank and your own currency and you depreciate that currency. Look at Ireland and Spain, where housing markets collapsed. Now they have to rescue their banks because the banks have gotten themselves in all sorts of trouble. But they’re on their own.

But what people don’t understand is that this is about the German banks. Essentially Greece and Ireland have a really strong card to play, which is that if they default they bring the banks down with them because German banks are linked to Ireland, Greece, Portugal, everywhere else. And I think the ECB has shown itself to be singularly playing what I call the economics of the Maginot Line, which is worrying about inflation, which was a mindset formed in the 1970s. This is a sovereign debt crisis. They can’t get around to rescuing these countries quickly enough. They’re not prepared to pay them money and so they keep saying how it’s going to stop here. Well it didn’t stop at Greece. It didn’t stop with Ireland. Hasn’t stopped in Portugal. Everyone said it’s going to stop with Spain. Spain covered the auction much less than people thought, raised rates, and I think what has happened now is the conversation of a few weeks ago about whether Spain was going to be safe…I think the conversation has now moved on from there because of their complete incompetence. And now we’ve moved onto Italy, which is also completely incompetent.

The ECB made a terrible mistake in July 2008, raising rates when they had gone into recession. They just raised rates again, which actually makes the cost of borrowing in Portugal, Ireland, Greece, and Spain a big problem. It has now brought Spain fully into the sector, as 70% of homeowners in Spain are on variable rate mortgages with the expectation of more rate rises to come. That will basically raise defaults, lower viability of most of the banks, and push Spain into default. It was an idiotic decision in July 2008, and they’ve just done it again. The problem in Europe is not inflation. Inflation is 2.7%.

DBJ: What would you suggest to improve the solution?

DB: I think a classic move is to have a European bond. If they issue a European-wide bond it would lower the cost of borrowing for the peripheral countries. It wouldn’t be ideal for Germany and France but it would help out all of the countries in serious need of help. Instead of Ireland or Greece issuing a bond at 13%, the Euro area as a whole issues it. That’s the first way of fixing things. Solves a great deal of the problems. And then the gainers are going to have to do something to help the losers. If they don’t, the sensible strategy on the part of the losers is to say, well we’re going to default. For the Irish and the Greeks…their best strategy is to default. Whether that means a 100% default or a 70% haircut for the bondholders, the governments, or whoever.

The European countries have made it clear that they will only act when there’s a crisis. The role of a monetary policymaker or central banker is to reduce crises, yet all they’ve done is create crises. So create another crisis to get this problem solved. Irish debt is being downgraded to junk. They tell Ireland she better not default because then she won’t have access to the capital markets. That’s no threat. All they have to do is go to [German Chancellor] Merkel and say, “unless you rescue us, you’re going to have to rescue your banks.”

DBJ: In your career thus far, what do you think was the most meaningful, significant, or interesting thing?

DB: The most significant thing I did was being on the MPC. I guess my big moment was my 150 basis point cut. But that wasn’t a great prize because the economy was tanking. Now, I often get called the person who called the recession, which is quite a good position to be in. It has had a big impact on my career.

But it was a very lonely place to be. I’ve said it was the most awful time ever. People were briefing against me. People said I was a crazy person. At the bank, everybody treated me like the guy who hadn’t washed. The newspapers wrote all sorts of awful things, the worst of which was I was an idiot without a village. You have to learn to look through that. In the end, it’s very easy to fold. But I didn’t. I held my ground. [I had faith in my ability to] read the data really well, a strength I didn’t realize I had.

DBJ: What are you doing now?

DB: We’re working on [the relationship between] biology and happiness–pulse rates, blood pressures…how physical things are impacted by happiness. I’m doing lots of work on youth unemployment and trying to get governments to help the young and unemployed. Actually, because I argued it, the government put a tax on bankers’ bonuses of about 1.5 billion and took that money to fund measures to help the young. So I’m proud of that. Also, I’m a central bank watcher. I wonder what macro policymakers should be doing now. I worry about making big macro mistakes again.

Andrew Ervin is currently an MBA ’09 candidate at the Tuck School of Business. After attending Penn State University, he worked as an actuary for research and development (R&D) at Liberty Mutual Group, one of the largest insurance companies in the nation. After coming to Tuck, he spent his last summer at The Parthenon Group in their Boston office and will be returning there full‐term as a Principal.

Dartmouth Business Journal (DBJ): Why did you choose to go into business and consulting? How did you break into the field?

Andrew Ervin (AE): I’ve always been an analytical‐quantitative person and so I wanted to work with numbers. I like the problem solving aspect of business in general, and the strategic nature of it as opposed to a career like law, for example. The world of business is constantly changing: there are always problems to deal with and there is always a need for people to solve them. Although my tenure at Liberty Mutual involved less of a strategic role than Parthenon, it did have strategic element in seeing how the market is changing, or how we approach something differently versus a competitor.

After graduating college, I started work as an R & D actuary for the Liberty Mutual Group, where I worked on managing new pricing structures for auto insurance, which was basically a technical role with a strategy element. A few years went by and I realized I didn’t want to be in insurance forever, so I applied to business school and ended up coming to Tuck mainly because of the small size. For business school, I wasn’t just interested the classroom stuff but also wanted to develop my leadership and teamwork skills as well.

I wanted to work on management consulting because it would give me a feel for different industries so I would get a better sense of what I want to go into in the long‐term. After my first year at Tuck, I went through recruiting and ended up accepting an offer at the Parthenon Group for many of the same reasons that I chose Tuck ‐ an intimate, entrepreneurial environment and a great culture.

DBJ: Are you planning to pursue this as a full‐time career or are you testing the waters in a variety of different options?

AE: Right now, I expect to be at Parthenon for about 5 years. At that point, I’ll decide whether I like consulting enough to stay there long‐term, or whether I’d rather move into a general management career. If I choose the general management route, I expect to move into a fairly high‐level management role in an industry that I am interested in.

DBJ: What does an average day in the office entail for you? If your job doesn’t really have an average day, what would be examples of projects that you work on?

AE: I was working on a case for a client in the for‐profit education industry (e.g., University of Phoenix or Princeton Review) in which we helped them revise their pricing strategy, increase revenues, and become more profitable. We found that there really wasn’t an established pricing strategy in the industry, so no one had a grasp on how to set pricing and no one really knew what students were willing to pay to attend different schools. We conducted a big research study among prospective students for the school and through it we gauged how students viewed price when choosing to attend a school. One result we found that was striking was that students viewed the cash they had to pay out of pocket at a much higher rate than they will value loans: a dollar of cash today is a lot more valuable than a dollar of loans they have to take out. We were able to quantify the consumer tradeoff between cash and loans, with those numbers we were able to turn to our client and tell them how to restructure financial aid packages in order to improve how attractive they were to students.

I think the most interesting part is when we conducted focus groups with students at the school, and put together a guide of different questions and information based on the groups. It is interesting to look at numbers but there is more credence behind them when you are talking to someone face‐to‐face.

DBJ: How would you respond to criticisms of strategic consulting firms that they are often too rigid and dependent on frameworks and models in analysis?

AE: When I was interviewing, I was a little turned off by the frameworks that strategy consulting firms follow and I personally feel that that does inhibit thinking out of the box. Structured frameworks aren’t always the best ways to approach things‐ especially a new type of problem. At Parthenon, we tended not to use many rigid frameworks, which was good, although it could have been the uniqueness of the project we worked on. We laid out a general layout of the project based on projects and pricing in the past but when we dug into the components there wasn’t prior frameworks to fall back on. I think that frameworks and models are good as a starting point but not something to rely on.

DBJ: How has the credit crisis affected you and your day‐to‐day work, and if it hasn’t, how has it affected your colleagues? In light of the crisis, do you think students would be better served working in another field for a few years before trying to break into financial services?

AE: The banks coming to campus are taking fewer people, so there are a lot more people are looking for other jobs like consulting, so it made competition a lot greater and harder for people to find positions. There are a decent number of people who tried at getting a consulting job but were unsuccessful. There are still a lot of general management, venture capital, and private firms recruiting here. It is too early to tell if my colleagues are going to struggle for a job generally but they may not be getting their first choice now.

DBJ: How do you think Obama’s recent election will impact the financial situation?

AE: I get the sense that people are excited for the change aspect that he brings, and the hope is that the new administration can calm the financial crisis. Tuck students are optimistic, and the majority of students are supporting Obama. The question is whether that will happen in time for the people who will be searching for jobs next summer. Personally, I don’t think any changes he brings to the administration are going to have a whole lot of impact by the time we enter the job market. The Street and investors out there think that he will bring changes to the industry. If volatility calms down, that will send a signal to the banks and especially VC and PE firms that the environment is getting better and they may return to their normal hiring capacity. Overall, there are still opportunities but they require that much more work. If you want to go into these industries you need a lot of work but also a plan b.

DBJ: Consulting/finance tends to have a reputation as a very stressful and time‐consuming career path. How have you balanced your work and social lives?

AE: It was pretty difficult ‐ it was definitely a demanding summer and I was working long hours. Fortunately, Parthenon also made sure we had a good time ‐ I had a number of friends from Tuck working at Boston but I didn’t see them as much not only because I was working long hours but because Parthenon would take us out and show us a good time during off hours. As a result, I got to know the other interns very well.

Parthenon tends to have less travel ‐ about two days a week for Full‐Time Principals. As opposed to other consulting firms, Parthenon (and Bain) consultants are working on 2 cases simultaneously, so you need to balance needs of two different clients, so you travel only when you need to because you need to be in the office for the two clients.

DBJ: Many of my friends have expressed that Dartmouth is doing students a disservice by emphasizing consulting and finance as the most desirable paths out of college at the expense of other fields like non‐profit, environmental sustainability, poverty alleviation and development, education, art, etc. How do you feel about this issue, and why do you think so many students want to break into these two fields when many don’t even know exactly what the work entails?

AE: I’ve heard the same feelings from people at Tuck as well, and I think the truth is that banking and consulting firms have the money to spend on very comprehensive recruiting efforts, so they are more than willing to be up here on campus as much as possible because they have the resources to do that and it pays off in the end. From the point of the students, I understand that those who don’t want to go into consulting or banking might become a bit overwhelmed and I think it would be great if something Dartmouth could do to increase the prominence of less popular tracts. However, it is tough to get other firms and other industries to spend the money on recruiting efforts because they don’t have quite the resources of banking or consulting firms. I think that getting other options on campus involves getting alumni in other fields to help out, get up here on campus, tell students how to pursue these strategies and tracks, and step up the visibility of some of the other industries.

I think that students want to go into consulting or banking because they aren’t sure what they want to being doing a few years from now. I think all alumni of consulting or banking firms would agree you get a lot of exposure to a variety of different industries. These careers are basically a platform to the business world, and it allows people to put off the decision of what they want to do specifically. After working in finance or strategy consulting, you can go into a lot of different industries, whether its financial services, consumer packaged goods, or anything else.

Giacomo Sonnino is currently a MBA ’09 candidate at the Tuck School of Business. Hailing from Rome, Italy, he holds a Master of Science in Engineering from the University of Rome “La Sapienza”. There, he rowed on the crew team and conducted research on Internet wireless networks. After college, he worked for three years in the strategy and internal consulting department at the Italian aerospace, defense, and energy conglomerate, Finmeccanica. At Tuck, he is studying general management and spent his last summer as a Summer Associate at the consulting firm McKinsey & Company, where he will return after completing his time at Tuck.

DBJ: Why did you choose to go into business and consulting?

Giacomo Sonnino (GS): At Finmeccanica, I worked on corporate strategic planning, mergers and acquisitions (M & A), and internal consulting. During my tenure, I was able to work constantly with high‐level directors, managers, and C‐level executives. This exposure to leadership led me to look into business and management. When I came to Tuck, I wanted to go into consulting because I was looking for a dynamic, fast‐paced career with opportunities to face very different and diverse business problems in different industries. I applied to a bunch of consulting firms, and I ended up choosing McKinsey at their Mediterranean office.

DBJ: Are you planning to pursue consulting as a full‐time career or are you testing the waters in a variety of different options? What are the usual exit options for management consulting?

GS: Looking back at my summer experience, I would probably do it for two or three years. I want a family in three to four years, and four to five days on the road is not always sustainable. When I was working at Finmeccanica I had a more balanced life and most projects were based in Rome, where I lived. It was easy to balance work and a social life because I was home four or five nights a week. However, when I worked as a consultant I was on the road four to five days a week. You can only have a life over the weekend, and that is the reason why the average turnover rate in consulting is three years.

Most consultants follow two main paths after their stint ‐ internal work for a corporation, such as a management or vice president position, or private equity, which is less travel‐based but requires more risk. It basically depends on what skills you develop, and most of the time you will end up working for a client that you did consulting for. Going into consulting, I was exposed to many corporate functions from marketing to operations to finance so I’m aiming at specializing in one of the functions in the future.

DBJ: At McKinsey, what did an average day in the office entail for you? If your job doesn’t really have an average day, what would be examples of projects that you work on?

GS: At McKinsey, I worked in the Rome office, where I was working on a project in Istanbul, Turkey with a Fortune 500 company. During the week, I was flying out Sunday nights to Istanbul and spending two days there with the client company. Either Thursday or Friday I was flying back Rome for Friday in the office. Usually, McKinsey consultants spend most of their time on the client side.

I was working on a high‐level team with two directors, one partner, two associate principles, one engagement manager, and one associate ‐ me. Two to three times a week I was working with the team on problem solving. Probably the most thrilling part of working here was that after only month in the firm I was expected to challenge directors and partners. They were asking me for advice in my field, and I was as important as they were.

In terms of the work, I was doing performance transformation, which is a strategic review and cultural review of the corporation. The client went through dramatic changes in the last few years, when the plant doubled from 2000 to 8000 employees in two years. They had a huge intake of workers who hadn’t assimilated into the corporate culture and the friction among old and new works were impacting the ability of the companies to deliver solutions. We came in to analyze company strategies, pick the best one and looks at the cultural obstacles that were threatening its implementation.

DBJ: Did your college education help you in your day‐to‐day activities in your job?

GS: Absolutely. When you study engineering, you learn how to solve problems in a structured way, so how to take a big problem, decompose it in smaller problems, and solve them one by one in terms of priority. This approach goes beyond technologies or math‐ you basically learn how to address problems and this applies to any job, and I think that’s why engineering is helpful in so many careers.

A downside to engineering is that engineers are often too rigid and don’t think out of the box, but that’s why we go to business school.

DBJ: Describe some of the most challenging projects that you have worked on.

GS: At Finmeccanica, I worked on one project I enjoyed a lot, in which we basically built a mobile operator (something like Verizon or Unicel) from scratch. We had to implement a network, access it, establish a marketing plan, a phone plan, and basically launch a business from the ground‐up. I was sitting with the CEO of the company at a table, and discussing how to launch a business that was targeting 2 million consumers. It was crazy because I was only 25 years old.

DBJ: How has the credit crisis affected you and your day‐to‐day work, and if it hasn’t, how has it affected your colleagues? Do you think as a result more/less students will try to enter your field? In light of the crisis, do you think students would be better served working in another field for a few years before trying to break into investment banking, trading, private equity, or hedge funds?

GS: I think this crisis is absolutely affecting everybody, both consciously and unconsciously. It has really reduced working opportunities and career prospects. Right now, I think I was very lucky to have a job and most of my colleagues are struggling to find a job when most companies are looking for one or two new people and they are going through a stack of resumes.

It is hitting banks the hardest right now, but
the crisis will start to affect other
businesses, including consulting. For
example, Finmeccanica has reduced hiring
and investments and other firms are doing
the same. This will affect their ability to invest in other new projects as well. It will take one or two years for the market to get better.

I recommend to juniors and seniors who can’t find a job in finance or consulting now to try to look for alternatives that are constructive towards one in the future. For, example if someone wants to enter an investment bank an alternative would be working for a private equity firm or in the corporate finance division of a company. Someone interested in consulting should look at working for strategy with a corporation, or try to start their own entrepreneurial project. A crisis doesn’t mean the world is stopping ‐ there are opportunities to build up your opportunities and skillsets.

DBJ: What advice would you give for students who are interested in breaking into consulting, finance, or related fields? What do you want to tell them about the work that you didn’t know but would have appreciated knowing going into the field?

GS: In the recruiting process there is really no room for margin of error, so students need to prepare very carefully for the interview, because competition is tough and the bar is set very high. You may not get many opportunities so you need to take advantage of those that you are given.

For McKinsey, I applied through the website in which I had to send in a resume, a cover letter, and fill out an online application. In 2‐3 weeks, you either receive a rejection or an invite to the first‐round interview. I was invited for the first round, which is 2 interviews, usually with an engagement manager or an associate principle. Each one is 45 minutes long and is divided into background questions and a case. McKinsey cases tend to be a bit more structured than other consulting cases. In 24‐ 48 hours you get feedback on your performance, and if you make the second round, the firm will fly you to the office and you will have two to three interviews with partners of the office. These tend to be longer ‐ about an hour ‐ but are similar to the first round interviews otherwise. After that, the company either extends you an offer or politely declines you.

My advice for nailing an interview is just be yourself, because at the end of the day they are evaluating who you are, and you are evaluating them. The important question to ask yourself is whether or not you will have a good time working with them. When I worked at McKinsey, I had an amazing time ‐ the people were very approachable. The McKinsey stereotype is that they tend to be more rigid personalities, but I didn’t find that at all. I had a lot of fun working there and I developed a really good relationship with my co‐workers.