Experts Foresee a Big Year for Energy, Ethics, Data, and the Dollar

 

Exxon-Mobil CEO Rex Tillerson on energy regulation: “If we're not careful this will become known as the Land of a Thousand Nos."

Troubling financial predictions, surprising angel investing statistics, and advice on how not to become the next Lance Armstrong were among the topics presented at the McCombs Alumni Business Conference on Feb. 8.

The event featured talks from faculty members Lew Spellman, Laura Kilcrease, Michael Hasler, and Robert Prentice, as well as a keynote address from Exxon Mobil Chairman and CEO Rex Tillerson. Read on for highlights from each of the sessions, and visit the Alumni Business Conference website to see presentation slides.

An Ethics Reality Check

“The good news is, you’re not as unethical as you could be,” said Robert Prentice, chair of the Department of Business, Government and Society. “Every one of us has the opportunity to mug little old ladies and steal candy from a baby — congratulations on not doing that. But, the bad news is, you’re not as ethical as you think you are.


“We all lie a little bit when it suits us. We are all Lance Armstrong … sort of,” he said. “So the word of the day is humility. When you read about the latest scandal of the day, everyone thinks it couldn’t happen to them, but it could.”

Prentice pointed out that while most people want to think of themselves as good people, we all act unethically from time to time, usually in minor ways. “When we can fudge a little bit to help ourselves out, we frequently do it — not that we know we are doing it.”

Prentice reviewed several research studies that point to people’s tendency to bend the rules when faced with any number of situations, including when we are rushed, overly emotional, or when we feel like we have little self-control.

“In the end, nobody can monitor you as well as you can,” he says. “If you want to be a good person, realize that there are a lot of forces working against you. You have to be aware of these factors, you have to monitor the situation, and you have to police yourself.”

For more on the subject, visit the Ethics Unwrapped website, a new McCombs project featuring a free video series on business ethics.

As the U.S. Prints Money, Investors are Fleeing to Foreign Currencies

The Federal Reserve is printing more and more money to finance the national debt, which is devaluing the dollar. That was just the beginning of Professor of Finance Lew Spellman’s ominous talk about U.S. debt. He added that investors are looking to move their money abroad to countries that have stronger currencies, like Brazil. Meanwhile, for every dollar the Fed produces, more dollars go abroad and strengthen the central banks in other countries — and their economies are growing quickly and catching up to ours.

“We have a new development occurring where we’re not only increasing our money supply, but we’re also forcing it on other countries as well,” Spellman said. “A large supply of something means the price goes down. So if we’re going to have a great deal of money increase, it’s probably going to lead to devaluation.”

Spellman cautioned against current U.S. spending habits.

“We have the short-term benefits of being able to finance government spending without more taxes to cover debt service. We get this kind of sugar high that everything on the surface seems fine and dandy, but what’s really building up below all this is that the government becomes more insolvent every day.”

The Truth about Angel Investors

Big venture capital deals receive a lot of attention, but most of the new jobs created in the past five years in America were created by small businesses with less than five employees. Angel investors put up a total of about $20 billion a year, says McCombs entrepreneur-in-residence Laura Kilcrease.

Kilcrease also put a human face on the angel investor.

“Many of these are wealthy individuals who have retired and feel that they still have something to contribute,” she explained. “In some cases they were helped by someone early in their career and they want to pass the favor along to others.”

“A great angel helps an entrepreneur see around the corner, gain a sober second opinion, network with people who can help build the business by being an ambassador, while gaining credibility in a field.”

There are 4.2 million millionaires in the U.S., and about 12,000 investors currently participate through angel networks in the U.S. However, angel investing isn’t for everyone.

“This is very risky, and investments typically don’t return within the first three years,” Kilcrease warned. “If they do pay off it is usually about six to seven years after the investment.”

The Future of Energy

In the midst of a challenging economy, there has been a rebirth in the energy environment, and we are in a race to meet the rising need for energy around the world, including developing nations.

“In households in the developing world, when the sun sets, reading and learning stop,” Exxon-Mobil Chairman and CEO Rex Tillerson said at the conference. “If we don’t plan for the future, we cannot spread prosperity across the world. We look at the next decades, and we project 2 billion more people by 2040, to a total of 9 billion. Energy demand in developing nations will rise by 60 percent. There will be billions of people who expect the qualities of life we have in the United States.”

He predicted that oil and gas will remain the top energy sources, with alternative energy sources wind and solar accounting for only 9 percent of the global supply.

“Oil and gas could support another 1.2 million jobs in the years ahead,” he said. “We have natural gas resources to meet nearly two centuries of demand, and it has reinvigorated steel manufacturing in the U.S., petrochemicals, and large equipment manufacturing.”

Tillerson added that energy-related carbon emissions, most of which come from electric power production, have dropped to levels close to what they were in 1995.

He called for business leaders to do what is right for society, with a culture of accountability, safety and efficiency. Government, meanwhile, should feel confident to allow responsible development given the breakthroughs in technology that allow more efficient and safe exploration.

“The regulatory process has stifled growth,” Tillerson said. “If we are not careful this will become known as the Land of a Thousand Nos.”

Big Data, Bigger Opportunities

Michael Hasler, lecturer and director of the Master of Science in Business Analytics program, spoke about the importance of big data analytics and the future of what he calls “the new oil,” heading to transform the economic landscape the way that oil did during the industrial revolution.

“In its unrefined form, data is a bunch of zeros and ones that you can’t do anything with,” Hasler said. “You do not make decisions with data; you make decisions with information.”

According to Hasler, the need for people that can refine the massive volume of information into usable statistics and trends is growing rapidly, and according to McKinsey Global Group, there will be between 140,000 and 190,000 unfilled positions for data analysts by 2018.

“Data science is becoming an important aspect of most organizations, and it is driven by the idea that we have sensors everywhere,” Hasler continued. “We have data we never dreamed we would have before, and now we have a way to use it.”

McKinsey Global Group estimates that big data has a value potential of $300 billion for the U.S. health care field, $600 billion in annual consumer surplus from using location data globally, and has the potential to increase retailers’ operating margins by 60 percent.

Hasler outlined the two fundamental truths of big data. The first: “Analytics do not begin with data; they begin with problems and opportunities.”

In other words, the desire to find solutions for an organization’s problems is what drives the use of big data analytics, and without a clear understanding of a problem, analysts cannot mine the opportunities.

The second fundamental truth: “More data does not guarantee better decisions. The right data guarantees better decisions.”

 

Faculty in this Article

Lew Spellman

Professor, Department of Finance McCombs School of Business, The University of Texas at Austin

Lewis Spellman received his BBA and MBA from the University of Michigan and his MA and Ph.D. from Stanford University. His research interests include...

Michael Hasler

Lecturer; Associate Academic Director for the Supply Chain Management Center of Excellence McCombs School of Business

Michael Hasler is a lecturer at the Red McCombs School of Business at the University of Texas at Austin where he teaches both graduate and...

Michael Hasler teaches in the Texas Executive Education program, featuring open enrollment, custom and certificate classes for executives and organization teams.

Robert Prentice

Professor, Business Law

Robert A. Prentice is chair of the Department of Business, Government and...

About The Author

Tracy Mueller

Writer/Editor, McCombs School of Business

Tracy is managing editor of the McCombs TODAY news site and McCombs alumni magazine. She is also the voice behind the @UTexasMcCombs Twitter account...

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