J. Harold Mulherin — RIP
by
Kam-Ming Wan
January 5, 2021
My relationship with Harold Mulherin was a magical one and can be best
described by main characters in the Harry Potter novels. Harold was like “Albus Dumbledore” and I was like
“Harry Potter.” Harold was a wise and dedicated friend and our friendship was
simple: Harold was a generous giver and I was an eager taker.
With great fortunate, Jonathan Karpoff introduced Harold to me in
a WFA conference in Sun Valley, Idaho in 2000. Our friendship blossomed after
the passing of Professor Armen Alchian because we shared a common conviction for
Armen’s inspiring works and warm personalities as well as the UCLA tradition in
economics.
Harold’s devotion for the UCLA tradition was uncompromising. When Harold was the first-year doctoral student at UCLA, he
earned A+ in mathematical
economics and two econometric courses. Due to his outstanding quantitative abilities,
he was assigned to TA for undergraduate microeconomic classes which used the
Hal Varian textbook. However, this assignment was contradictory to his ultimate
goal to teach UCLA tradition in economics. Harold was courageous and declined the
assignment reasoning that if he wanted to teach Professor Hal Varian’s type of economics,
he would have gone to Michigan (where Professor Varian was then located) to
pursue his doctoral degree. Luckily, a pareto optimal outcome was reach because
he was reassigned to lead quiz sections for
Professor Victor Tabbush who used Alchian & Allen (Exchange and Production).
Harold was gratified and his perseverance paid off because he got the highest rankings
of all teaching assistants.
Harold was an “actions speak louder than words” person. To express
his admiration for Professor Alchian and the UCLA tradition, he put that in
action and launched a Special Issue in the Journal of Corporate Finance to
honor Professor Alchian for his intellectual contributions to our profession. To
accomplish this mission, he assembled an “Order of the Phoenix” comprising his
confidants and colleagues such as Susan Woodward, Michael Maloney, Duncan Cameron,
Harry DeAngelo, Thomas Hazlett, and Jonathan Karpoff. The Special Issue is a “Mirror
of Erised” which shows Harold’s deepest and most monumental contributions of Professor
Alchian including property rights economics, theory of the firm, capital
markets, and corporate governance.[1]
Harold was a “talk-the-talk and walk-the-walk” editor. His editorial
leadership was proactive and similar to the Coasian style.[2] For
a decade, Harold was the co-editor for the reputable Journal of Corporate
Finance which was founded by Professor Ken Lehn to publish meaningful empirical
papers in corporate finance. Together with Jeff Netter and Annette Poulsen,
they were the fantastic trio who set a clear mission to advance the right kind of
financial economics, especially those with solid theoretical foundations, real-world
relevance, and policy implications.[3]
To follow up with his “talk-the-talk” mission, Harold’s research had “walked-the-walk” since his early days at UCLA. In Harold’s dissertation, he set out to examine two fundamental economic questions: (1) what affects contractual complexity across firms? And (2) what impacts vertical integration across time? To enrich our understanding of these questions, Harold pored over 10,000 natural gas contracts between natural gas producers and pipelines. He found that natural gas contracts are more complex when producer assets are more specific (i.e., less pipelines and more producers), a result consistent with Klein, Crawford and Alchian.[4],[5] Harold also found that regulations are the main determinants of vertical integration across time. Specifically, the federal regulations in the 1930s caused vertical segmentation of the natural gas industry, whereas deregulations in the 1990s triggered vertical integration because firms were allowed to merge vertically to reduce transaction costs.[6] His dissertation shows that transaction costs and governmental regulations are essential determinants of economic organizations.
His dissertation inspired many to address meaningful economic questions including me. I collected over 10,000 CEO compensation contracts to examine the complexity of such contracts and its relationship with CEO power because powerful CEOs are commonly misconstructed as entrenched and use flexible and opaque (i.e., less complex) contracts to obtain excessive compensation. Although compensation to some powerful CEOs are perceived as “outrageous,” these CEOs are inspirational, game changing, and irreplaceable. They are the good outliers in the business world. Do you consider $600 million in CEO compensation exceptional? If so, you should ask Apple’s shareholders whether the late Steve Jobs deserved to obtain that mega stock options grant in 2000. Similarly, do you consider $55 billion in CEO compensation outrageous? If so, you should ask Tesla’s shareholders whether Elon Musk deserved to obtain that massive compensation package in 2018.[7],[8]
Harold was a “fictional” mentor to me because he was surreal: wise, caring, and protective in every meaningful ways. Our mentorship is unsophisticated: Harold gave thoughtful and timely advices which I executed willingly and delightfully. When Professor Harold Demsertz, an intellectual giant in our profession, left us, Harold was the first group of people who initiated the Demsetz conference to celebrate his lives and works. Even in his darkest hours and our most challenging circumstances, Harold always stood by me and gave me countless considerable but uncompromising advices because he truly admired Professor Demsetz’s immense contributions and the UCLA tradition. I am so sad that Harold has left us unanticipatedly. However, my memories of Harold are always alive which is similar to what Harry Potter felt after Albus Dumbledore has gone to a better place: “He [Dumbledore] will only be gone from the school [Hogwarts] when none here are loyal to him.”
The tragic loss of Harold reminds me an ancient wisdom “As is a tale, so is life: not how long it is, but how good it is, is what matters.”[9] Harold’s infectious laughs, truthful friendship, honest but thoughtful advices, and uncompromising passion for good research and beers will be sorely missed.
I first met Harold Mulherin when I was a Ph.D. student at the University of Pittsburgh. Ken Lehn had invited him to present his research and I got to spend some time with him discussing my research. All I remember from that meeting so long ago was how much fun it was talking to him about research. We bantered but also discussed interesting research questions related to contracting.
ReplyDeleteWe often met at conferences afterwards and then spent some with him when he visited Hong Kong a few times. I have learnt so much from talking to Harold and I will miss him dearly.
Yes, I also find it stimulating when discussing research ideas with Harold in a relaxing and friendly atmosphere, especially when alcohols were involved.
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