Harvin C. Moore III (right) gave a speech on ethics Nov. 4 to Urton Anderson and Janet Dukerich’s undergraduate studies class, Organizational Corruption and Organizational Control.

At first glance, Moore looks like the picture of success. He earned a law degree from UT Austin and went to work for a law firm in Houston, where he had a “Midas touch” for putting together lucrative business deals. His real estate developments were valued at $250 million and he co-owned a savings and loan business with more than $400 million in assets.

It wasn’t until Moore took off his jacket and put on the prison badge he wore during his 2-year sentence in federal prison that students realized that this wasn’t going to be like any ethics speech they had heard before.

Moore was in business during the collapse of both the oil and gas industry and the real estate market in the four oil and gas states - Texas, Colorado, Oklahoma and Louisiana. That collapse caused all of his personal business to fail and left him with only the savings and loan institution, which he believed to be in excellent health.

However, the savings and loan institution was hit by defaults on the loans it had made to people in Houston and under the rules the partners could not declare a dividend for themselves under those circumstances. That meant that they could not pay back their debts and lenders were threatening to foreclose on their stock in the institution, thereby forcing both parties into bankruptcy.

It was the pressure and fear of being without a job that caused Moore to make three loans to his friends. Those friends would then use part of the money they were lent to “buy” miscellaneous assets from Moore’s personal holdings so that he could use the money to pay his debts.

Moore said he knew that this type of lending was illegal but that he rationalized his actions by convincing himself that he needed to do it to survive. He also told himself that he and his partner were the only ones at risk since they had made the original loan and would be the only ones hurt if the borrower defaulted. He tied it all up by reminding himself that “everybody’s doing it,” and that they were doing far worse things than what he had done.

Things continued to get worse at the institution, however, and by the end of 1988 the company had been taken over by the Resolution Trust Corps (RTC), which mean that Moore lost ownership of the company to the government and had to file for bankruptcy anyway. It was then that his 27-year marriage ended in divorce.

During the investigation of his bankruptcy filings the RTC found those illegal loans and filed a criminal suit against Moore. While he was planning how to defend himself, he suddenly realized that he had no defense.

“It didn’t matter that the institution was solvent when I made that loan,” said Moore. “Did I get the money out correctly? The answer is no. That is a federal crime, and I realized I could not go into a courtroom and plead not-guilty.”

As a result of his conviction, Moore spent 601 days in federal prison and three years on parole in Houston. He was forced to pay $500,000 in restitution and he lost his licenses to practice law and to issue property, casualty and life insurance. He also lost the right to vote or to own or possess a gun.

He said that the toughest thing was getting a job after his release. He went through five jobs in five years before he found one that gave him a platform from which to rebuild his life and his career.

Moore ended his talk by reinforcing the consequences of one bad decision.

“When you make the right choice, most of the time there is a short-term cost associated with it,” said Moore. “But the potential of taking the other side is a long-term liability.

“A felony is forever,” he continued. ”That’s not a legacy to leave to anybody.”

David posted the full interview, along with audio clips, on his ID University blog. Check out a few highlights from Bentzin’s answers below:

On frequent reinvention of your marketing strategy:
A strategy is something a company can do better than their competitors sustainably over a long period of time. And so if the strategy changes every 6 months, it isn’t really a strategy it’s a tactic. And in some businesses these tactics are a process of exploration, finding out what works and what doesn’t work, which can be a very effective way of strategy development. To a certain extent the best market research you could possibly do is to put an offer in front of consumers and identify what consumers respond to. Once you’ve defined your strategy, if it’s a successful strategy, it will carry you for a very long period of time.

On how Dell has responded to changing market conditions:
Dell, with the Latitude Z and with other products, is starting that process of exploration, to identify how to compete in the world where competition is defined less on the basis of configurability and supply chain, and more on the basis of integrated whole products delivered with relatively little configuration. Dell’s development model historically had been the very fast follower, not necessarily innovating in all the new product categories, but being the first to market to deliver the new technology in the configuration that consumers found attractive.

Now we’re finding that Dell is exploring this possibility of more native product innovation, competing directly on the basis of product innovation as opposed to following the trends of where consumers were headed.

On having an authentic social media voice:
I find that social media and that kind of communication is very difficult for to sound authentic coming from a contractor or somebody who’s outside of the company. Sitting outside the company and trying to be the personality of the brand is very, very difficult. It’s typically going to be most successful from someone who is in the heat of the battle in direct contact with the information flow of what consumers are saying, and what is the product offering, and the company’s strategy in terms of the product they’re offering. That will ring true as authentic because it is authentic.

Tito’s [Vodka] has a very strong brand profile, and all of Tito’s social media comes from one brand of manager who’s been with the company for a very long period of time and feels passionately about the product, feels passionately about Tito’s, and does an outstanding job of representing the brand because she really represents the personification of the brand.

Motorola put together an open-ended case that challenged the four-member teams to present an innovative global business strategy for the company. The winner was the University of Hong Kong, which became the MIBC’s first repeat winner.

“It was a fantastic event,” said Gautam Shah, MIBC chair. “We had a great, involved company with Motorola. The University of Hong Kong team presented a thorough solution that impressed all of the Motorola judges. It was airtight.”

McCombs’ John Doggett, one of the competition’s faculty advisors, said that what makes the MIBC special is that it uses only real cases.

“We give them a three-page ‘engagement letter’ from senior management and ask them to spend two days researching the challenges mentioned in the letter,” Doggett said. “And they have the opportunity to engage with the senior executives during a Q&A session a day before they make their recommendations.”

As for the winning team, Doggett said that Hong Kong was “simply amazing.” He said, “In 48 hours they produced a new product development and launch strategy for two new mobile devices for the China market that was so detailed that they even had chipset specifications for the two new phones. What those ‘undergraduates’ did during the finals was truly something to behold.”

Doggett continued, “ Motorola sent four executives to be judges, and their former acting CFO and current board member, Tom Meredith, sat in on the presentations. It says volumes about what Motorola thought about the value of this competition that they would send so many senior managers to see what undergraduates from 20 universities from 9 countries had to say.”

“The students were outstanding,” said Elizabeth Altman, vice president of business development in Motorola’s Mobile Devices business. “They showed great skill and professionalism in both their analyses and presentations, and a few of the groups developed creative ideas that we will explore further. Additionally, the team of undergraduates that organized the competition was equally impressive. We thoroughly enjoyed our involvement and commend the organizers and competitors for an exceptional event.”

In addition to the University of Hong Kong, the other three finalists were FGV from Sao Paulo, Brazil, the University of Washington and Georgetown University.

“We live in a global economy and need a single set of accounting standards for more efficient capital markets,” Barth said.

She told students they need to understand the fundamental accounting concepts because they provide the basis of the framework for financial reporting. She warned that in the future, accounting professionals will need to make judgments and understand “the why” behind a standard, rather than following thousands of specific rules as they do now.

Barth ended with a discussion of common misunderstandings about financial reporting, such as “historical cost is a misnomer” and that “neutrality does not mean there are no consequences.”

Listen to audio clips from Barth’s talk:

Overview of IASB Goals.mp3 (3m23s, 4MB)

IASB Framework.mp3 (2m:59s, 3MB)

Financial Reporting Misunderstandings (6m:06s, 3MB)

Full lecture.mp3 (52m:56s, 69 MB)

“Being recognized with an award named after Professor Nemhauser is a great honor that carries with it the great responsibility to produce excellent research during the academic career that I have just started at McCombs,” says Mendoza-Arriaga, who joined the McCombs faculty this fall. ”I hope to contribute much more to the quantitative finance group in the near future.

“I feel very grateful for the support received from everyone in the IEMS program: faculty, staff and classmates. In particular, I feel very in debt to my advisor Vadim Linetsky, from whom I learnt so much about quantitative finance.”

His thesis proposes a modeling framework that allows to consistently price and hedge the entire book of credit as well as equity derivatives, in addition to the ability to incorporate a rich assortment of empirically relevant features of these markets.

A recent column in the Wall Street Journal, headlined “When Bad Luck is a Crime,” uses research coauthored by Andrew Henderson (right), associate professor of management.

Excerpt: When it comes to cheering CEOs, booing them or throwing them in jail, a consideration that ought to be nagging is whether we’re reacting to luck or design. Ken Lay, to cite a notorious example, was prosecuted not for the sins that brought down Enron, but for failing to tell investors the company was predestined to fail even as he tried to save it….

How much more fun, when dealing with circumstances like these, to play the after-the-fact-know-it-all, naming heroes and villains with the confidence afforded by the rear-view mirror. Bad enough is when journalists give unreflective vent to this urge, but unhealthy for society is when prosecutors do it.

For a bracing dose of perspective, consider the flip side question. An eye-opening new paper asks: With so many public companies to choose from, how do we know the good firms from the merely lucky ones? The question is a much harder call than you might think.

The authors—Andrew D. Henderson of the University of Texas at Austin, and Deloitte Consulting’s Mumtaz Ahmed and Michael E. Raynor—begin with a caveat no less applicable to the joyous media blame-laying after the subprime debacle: “If you have a large number of players in a game in which luck plays a major role, then some players will assemble seemingly impressive winning records by chance alone.”

“Luck,” they add, “can mislead us . . . because humans tend to mistakenly perceive patterns in random data.”

By way of analogy, imagine a classroom of 70 students, each of whom is asked to flip a coin and sit down if tails comes up. According to the law of probabilities, after seven flips a single student should be standing—the one who flipped heads seven times in a row. If the student were a company, the authors say, he’d quickly become a case study of “excellence” in coin flipping.

Messrs. Henderson, Ahmed and Raynor, who presented their work at the Academy of Management’s annual meeting in Chicago in August, weren’t just indulging an urge to philosophize. Their goal was to design criteria for identifying excellent firms while cutting the rate of “false positives” to approximately one in 10.

It turns out the criteria are exceedingly stringent. Over a period of 10 years, a firm must score among the top 10% of performers at least nine times. Only 150 firms in a database of more than 21,000 make the grade—including Microsoft, Tambrands and Landauer Inc. (a manufacturer of radiation dosimeters).

Remember, the goal here is to create a list of “excellent” firms only 10% of which owe their ranking to luck. It still doesn’t tell you which were the lucky ones. Here, journalism, and perhaps only journalism, can unpack the final puzzle—albeit a journalism that properly understands the role of luck in determining the outcomes that so excite journalists and sometimes prosecutors in the first place. Read story in the Wall Street Journal.

Shortly after the acquistion, TEMBA Director Trent Thurman interviewed Ranjit Nayak, MBA ‘07, who founded the company along with Divakar Jandhyala, MBA ‘07. Nayak can also be seen in a recent panel discussion about the start-up process and how the McCombs School’s entrepreneurship offerings, including the Moot Corp competition, helped in the process of building a successful venture such as eVapt. View the video.

Trent Thurman: First of all, congratulations on the news. I know this is an exciting and probably very satisfying accomplishment for you guys. Was acquisition always a part of the strategy or did the MagnaQuest deal come as a surprise?

Ranjit Nayak: Acquisition was the preferred exit at the very inception of the venture. It was therefore not a surprise.

TT: Give me a little background on what you guys were doing when you entered the program and whether or not you thought TEMBA would be a platform to launch your own venture?

RN: I was working as an integration manager at IBM Corporation when I started the evening program (Divakar was a product line development manager at BMC Software). As far as starting my own business, no, that was not on my mind when I entered the program. However, starting my own business has always been something I wanted to do.

TT: How did you and Divakar first meet and when did you realize you wanted to pursue this idea together?”

RN: Divakar and I had actually met socially before the TEMBA program, but we were in Bob May’s managerial accounting class and were fascinated by the use of activity-based costing and use of cost drivers for accounting. We felt that this should be applied in the computing industry.

TT: Very interesting.  Dr. May will love to hear that. Cloud computing technology was fairly new when you developed this idea, so take me from that managerial accounting class to the development of the idea.  In other words, exactly how was eVapt born?

RN: True, cloud computing was new. The idea was born out of problems seen in the enterprise software space but clearly the solution was more applicable in a SaaS ( Software as a Service) space which is now a subset of cloud computing. Incidentally, Divakar and I had a conversation about the problems faced by en-terprises en route to the first BIC (now Austin Intensives) prior to the start of classes.

TT: Can you define cloud computing in layman’s terms?

RN: In layman’s terms, cloud computing is the delivery and consumption of computing services as if it were a utility.

TT: I understand that you guys bounced a lot of ideas off of Daniel Nelson (TEMBA ’06 and founder of Phurnace Software) before your launch. How valuable was it to have someone like Daniel in your corner?

RN: That is correct. It was extremely valuable to have someone like Daniel to bounce ideas off. It was like driving in a thunderstorm following the tracks and tail lights of the car in front.

TT: Great analogy. Clearly, you and Divakar also did a lot of brainstorming and bouncing of ideas. What do you consider the strengths that each of you brought to the table?

RN: Both Divakar and I brought a track record of experienced software industry management capability.  Divakar brought some technology evaluation strength, while I had experience in customer engagement and professional services.

TT: Other than Moot Corp, what part of the TEMBA program best prepared you for launching this venture?

RN: Being part of the TEMBA program allowed us to participate in UT’s Idea 2 Product competition. Also, I took an entrepreneurship practicum that was simply the best preparation I could have hoped for. The class, taught by John Doggett, opened my eyes and let me consider my options.

TT: Tell me about the Moot Corp experience and how it helped refine your business plan.

RN: The preparation for Moot Corp gained in the New Venture Creation class allowed us to think through the issues rationally in gradual progression. The Moot Corp competition itself helped us identify gaps and holes in the business plan. The questions posed by the judges came from their own experiences. It was up to us to learn from their perspectives - and perhaps mistakes - without having to commit them ourselves.

TT: Obviously, you knew you were onto something when you won the McGinnis Venture Competition at Carnegie Mellon. Were you guys prepared to launch even without the validation of a competition such as McGinnis or Moot Corp?

RN: Interestingly, the decision to launch this venture was made before the McGinnis Venture Competi¬tion.  Divakar and I had quit our regular jobs by Jan 2007.

TT: Wow. So, how was eVapt initially funded and at what point did you get investors?

RN: eVapt was initially funded by our savings. The McGinnis Competition gave us almost $45,000 in cash and services, which kept eVapt going through the end of 2007.  We got angel funding in Jan 2008.

TT: So, back to the acquisition. I understand that eVapt will remain in Austin. Will you and Divakar stay with the firm?

RN: Yes eVapt will continue operations in Austin. Divakar plans to stay on with the firm.

TT: So, what’s next for you?  Any new ventures in the works?

RN:  I am definitely looking at all options at this time. A new venture is an option I am seriously consider-ing.

TT: Looking back over the last few years, is there any advice you would give current TEMBA students plan-ning on pursuing an entrepreneurial path upon graduation?

RN: Students must understand that entrepreneurship is a very tough proposition. Financial preparation and spousal support is absolutely essential before diving into it.  It is an emotional roller coaster, but very rewarding.

TT: Thank you Ranjit. Again, congratulations and best of luck to you and Divakar.  I look forward to hearing about your next adventure.

To learn more about eVapt, visit them online at http://www.evapt.com or follow them on twitter at http:// twitter.com/evapt.

The competition, hosted by the Eller College of Management at the University of Arizona, presents pairs of business students from around the world with a business ethics case that they could face in their careers. The students are instructed to consider ethical issues from the viewpoints of different stakeholders and make final recommendations regarding the case.

This year’s case revolved around a fictional automobile company based in India that has produced the lowest priced vehicle in the world.

Students were asked to consider, among other things, the advantages the new vehicle has for helping lower socio-economic groups find both mobility and a way out of poverty, and the accompanying costs of millions of new cars consuming petroleum reserves and adding to air pollution and global climate problems.

Elon University took first place. Teams from the University of Southern California and Georgetown University took second and fourth place, respectively.

Lee Scott

Dean Gilligan began by asking Scott about his very first job, which Scott said was scrubbing toilets at his dad’s service station on Route 66 when he was in the sixth grade. According to Scott, the most valuable lesson that he learned at that job came from watching his dad interact with the garbage man. Since the garbage man had a prison record, most people hid things when he came into the office, but Scott’s dad never did. As a result, the man stole from everyone except his dad because he was the only one who trusted him.

That lesson in trust and integrity came up again when Scott was asked what his biggest mistake was.

“I had a person working for us who was very good,” Scott said. “He broke some rules…and I allowed that. In the end he set his own rules in areas of substance and broke those. It ended up being extraordinarily difficult for him, extraordinarily difficult for the company and extraordinarily difficult for me personally. If somebody’s breaking the rules, regardless of how good they are and how much you admire them, you have to hold them accountable.”

Scott went on to say that when Wal-Mart founder Sam Walton was alive, if you fired someone for an ethical breech you were also at risk of being fired if the breech occurred because you didn’t have the right controls in place with your people.

On a lighter note, Scott said that one of his greatest accomplishments was the team of people that he helped create at Wal-Mart.

“It’s just a phenomenal team of people with a real sense of ethics and a commitment to customers and a commitment to associates,” said Scott.

Scott also talked about how Wal-Mart sets itself apart by doing things differently. According to Scott, he used to share a room with the CFO when they would travel together instead of booking individual rooms. In addition, Wal-Mart does not pay for alcohol on trips.

“If you want to drink, the company doesn’t care if you have a glass of wine when you’re at dinner because you’re a responsible adult, but we don’t think the customer wants to pay for you to have a glass of wine,” Scott said.

Scott returned to this topic later on in the interview when he said that the Wal-Mart offices haven’t been remodeled since he started with the company in 1979. He contrasted this to Merrill Lynch, who he said recently spent $1 million to remodel their offices even though they are facing bankruptcy.

Editor’s note: For more on Lee Scott, his leadership at Wal-Mart and recent changes within the company, check out this interesting article from Fortune, “Why we don’t hate Wal-Mart anymore.”

Maintaining Differentiation (1m:29s, 2MB)

Biggest Mistake (2m:05s, 2MB)

Integrity (2m:02s, 2MB)
 

The Future (5m:03s, 5MB)
 

McCulloch, an internationally renowned statistician, illustrated how he uses BART (no relation to the Simpsons), a computer system that can analyze data to find the relationships between variables.

This process, called regression analysis, is used to predict trends and find patterns among sets of data. According to McCulloch, it is commonly used by companies with large amounts of consumer data or by financial analysts.

BART, which stands for Bayesian Additive Regression Trees, was a joint venture between McCulloch, Edward George from the University of Pennsylvania and Hugh Chipman from Acadia University in Nova Scotia.

McCulloch says that what makes BART so amazing is that it can interpret thousands of variables with only very few observations from which to pick out trends and consistently predict the correct trend function.

“Ten years ago I wouldn’t have believed that I could solve these kinds of problems,” said McCulloch.

The real-life example McCulloch offered was of a drug company who wanted to know how to make the most effective drug for a certain disease.

The company pinpointed 266 chemical characteristics of the drug and ran tests with 29,374 different combinations of those characteristics. For each test the researchers recorded whether or not the drug killed the bacteria.

All of this information was plugged into BART, and the program was able to tell the researchers that there were really only seven chemical characteristics that were important in the formulation of the drug. It also helped the researchers find the perfect dosages and combinations of those seven elements in order to manufacture the most effective drug.

To learn more about BART, download the full research paper (PDF).