Sharon Oster: Mentor, Teacher, Friend
Professor Barry Nalebuff shares memories from his three decades as a colleague of the beloved teacher, scholar, and dean, who passed away on June 10.
Sharon M. Oster leaves many legacies. There are her children, Emily, Stephen, and John. There is also her extended family: her countless students and colleagues (aka her kids) for whom she was a role model and mentor. Count me in that list.
Sharon was the embodiment of SOM. The school’s motto is Educating Leaders for Business & Society. For many years she was the “&.” SOM is usually ranked first in nonprofit management. Sharon was the reason for this ranking. Much like LeBron James in his peak, she was able to carry a team to victory. Her textbook Competitive Strategy in the Nonprofit Sector was the gold standard at Yale and everywhere else.
Speaking of nonprofit management, I think it’s fair to say that we at Yale were the best-managed nonprofit, in no small part due to her influence. Sharon created a community culture, one that has allowed us to attract and keep the world’s best talent. In a world of givers and takers, Sharon was the greatest giver and instilled that spirit in those around her. She trained the new hires, myself included, to be part of an organization that chips in. The success of our group is largely due to her leadership. Oster’s approach to teaching, research, and community set the tone for others around her.
Sharon cared passionately about gender equity in her research and in her practice. She was the first tenured women at SOM and she helped create an economics group with four senior women, almost 30%—and that wasn’t including her. Her efforts on behalf of women in the profession, both at Yale and more broadly, earned her the American Economic Association’s Carolyn Shaw Bell Award.
Sharon was equally passionate about the school and teaching. When we redesigned the MBA curriculum, she pretty much taught every course in the new core—no small feat—and through her teaching virtuosity ensured that an otherwise chaotic transition was a great experience for the students.
No one has her ability to know every student’s name, both in the class and for years after. She was somehow both tough and nurturing. She wouldn’t let a misguided answer slide by. If the answer was off base, she might say: “Now, Mr. So and So, why would you think this?” Hint: that was a signal to try a new tack. In spite of her active cold-calling, there was never an atmosphere of fear in her classroom. Her students, much like fermenting yeast, rose to the occasion. She maintained lifelong friendships with her students. She won the teaching award at Yale three times and was recognized by the Academy of Management with the 2018 Irwin Outstanding Educator Award for Excellence in MBA/Executive Education.
Beyond her personal touch, she had the ability to make every idea as simple as possible but no simpler. That also made her an ideal expert witness and an unparalleled textbook author. Her Modern Competitive Analysis was Yale’s one-upmanship on Harvard’s Competitive Strategy text from Michael Porter. In 2007, she joined Chip Case and her husband Ray Fair in creating modern and relevant editions of their Principles of Economics text.
Sharon had no patience for bureaucracy. She understood why people went into for-profit ventures (to make money). She understood why people went into not-for-profit ventures (to make a difference). But as she wrote in her 1994 paper “The Postal Service as a Public Enterprise,” she had trouble figuring out how a big bureaucracy can motivate its workers. “It is an interesting question whether the government can have any highly motivated workers.” Perhaps the Forest Service was the exception, but even here she had her doubts.
With her antipathy toward bureaucracy and no aspirations for titles or power, she never aspired to be dean. But, in 2008, when a crisis emerged and the school was suddenly left leaderless, she stepped in and was the best damn dean we ever had. She was decisive. She knew how to handle the egos of donors and the faculty. She put the interests of Yale and the school ahead of herself. As always, she led by example. She took a $100,000 pay cut from what she would say was her inflated dean’s salary in order to fund internships for students. She was the living paradox of being the embodiment of John Stuart Mills’ homo economicus—the truly rational actor—and yet one whose utility function put most of its weight on others.
Sharon was widely known for her wise counsel. She was part of SOM and Yale’s kitchen cabinet for many years. Everyone wanted her to be on their board. Choate Rosemary Hall and Yale University Press were two of the luckier nonprofits who landed her. These boards are often populated with very wealthy donors with strong opinions. Sharon’s intellect and charm helped guide the donors to provide the support the organizations really needed.
She wasn’t without flaws. Aoccdrnig to a rscheearch at Cmabrigde Uinervtisy, it deosn’t mttaer in waht oredr the ltteers in a wrod are; the olny iprmoetnt tihng is taht the frist and lsat ltteer be at the rghit pclae.1 Sharon took this research to heart and didn’t bother with proofreading or spellcheckers. Here’s a recent example: “Amazingly my husband does out teases on the theory that a mace guy should know how taxes are calculated.” (For those in doubt: “Ray does our taxes on the theory that a macro guy should know how taxes are calculated.”) When we got an email from Dean Oster that was typo-free, we knew it was written by an assistant.
I’ve known Sharon for some 33 years. I didn’t get to see the motorcycle-jacket hipster Sharon of the 60s and 70s. And yet that effortless coolness was always there. It created a frisson in her presence. She was the Mick Jagger of academics, infinitely cool and ageless, and yet willing to hang out with nerds. She made us feel cool. And she loved a great party.
Sharon would probably have wanted me to have stopped with the party theme. Of course, there were her academic research contributions. Her research might seem mainstream today, but she was at the forefront of using an economist’s lens to look at women’s rights and discrimination more broadly. Here is a highly selective view of some of her 40+ published papers.
In “A Note on the Determinants of Alimony” (1987) Oster used court records to study alimony payments in New Haven. At the time, alimony only went from men to women (and only to women who had been faithful!). It was not legally possible for women to pay men alimony in Connecticut. While that might seem to be advantageous to women, Oster explained why this was a problem, not a benefit. Unless women have the ability—nay, requirement—to pay alimony when they are breadwinners, husbands wouldn’t be as willing to invest in their spouses’ careers, as that investment would be lost if the couple split. Thus, the inability to contract for women-to-men alimony holds women back.
Her 1987 paper with Paul Milgrom on the Invisibility Hypothesis was a brilliant flip of the Peter Principle. Under the Peter Principle, people get promoted until they are no longer competent in their job; people get one too many promotions. In the Invisibility Hypothesis, women and minorities get one too few promotions in order to keep their talents hidden so that rivals don’t poach them. This is the invidiousness of invisibility.
Since invisibles predict they won’t get promoted, they don’t have enough incentive to invest in human capital. Invisibility also distorts the choice of a profession. If invisible, it may be better to get trained as an electrician than as a history major since there is less room for arbitrariness in job assignment.
Oster’s paper says no one firm can solve this problem on its own. Nonetheless, she did her part to promote and make women’s talents visible. When Yale lost the now-visible talented women to other places, these women and the world were better for it.
In her 1975 paper “Industry Differences in Discrimination Against Women,” Oster found a better way to demonstrate evidence of gender discrimination. One can’t compare the fraction of accountants who are women versus the fraction of nurses who are women. There are too many possible confounding factors that determines the choice of a profession. Instead, Oster looked at the disparity in the fraction of women accountants across industries. Why should there be fewer women accountants in motor vehicles versus printing? Such disparities were evidence of systemic discrimination.
She was also an early leader in understanding income inequality. According to a data analysis done by Andrew Brimmer, the first African American to serve on the Federal Reserve Board, in the 1960s, incomes of Black Americans were more unequal than those of White Americans. That result didn’t strike Oster as being quite right: White people earn more from financial capital, and also get a better return on human capital.
This led to her first published paper in 1970, the year she graduated from Hofstra. “Are Black Incomes More Unequally Distributed?” explained what was really going on with intraracial income inequality. She showed that in each region of the country, Black income was more evenly distributed than White income. However, a much larger fraction of Black people lived in the South, which was the most unequal region.
This is the classic aggregation paradox. In each department, the average quality of Yale is better than Harvard. And yet Harvard can still come out higher on average if the worst departments at Yale are much larger than the corresponding ones at Harvard. The same aggregation paradox explained the confusing statistics about the apparent larger income inequality among Black people than White people.
There was a bit of a cheeky side to Sharon Oster. Her 1980 paper in the American Economic Review (AER) was titled “The Optimal Order of Submitting Manuscripts.” She employed classic operations-research techniques to figure out the right order in which to send papers to journals. The answer, of course, depends on the stage you are in a career, your impatience, your value of prestige, and so on. While the AER was the very top journal, it wasn’t always the optimal first choice. But for Oster, it was. She ends the paper with:
Finally, as I am sure it will be asked, I have calculated the optimal order for me, a slightly impatient, prestige seeking 32-year-old assistant professor. My optimal order is AER, REStat, Econometrica, JPE, IER, SEJ, QJE, EI. So given the journal you are now reading, you know how many times this paper was rejected.
Sharon had famously high standards. A few years back, I gave a talk at a coauthor’s retirement party. I ran the talk by Sharon and she thought it was pretty good. She told me to be sure I did at least as good a job for her. If this memorial isn’t up to Sharon’s standards, it’s only because I’m sadly missing her guiding hand. We all are.