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Terrence W. August

Terrence W. August

Finding Clarity Amid Uncertainty

How does learning about their improved prognosis reduce the anxiety of cancer patients? How will simultaneous release of movies in theater and video expand viewership and increase revenue? What are the best ways to achieve optimal patching to enhance the security and performance of software after its release? These are just a few of the many questions that have engaged Terrence August, Associate Professor of Innovation, Technology and Operations at the Rady School of Management. He’s a beloved educator and brilliant researcher who was named Jerome Katzin Faculty Fellow in 2020.

For patients diagnosed with cancer, the psychological fallout from the disease – depression, anxiety and distress – is as debilitating as the physical suffering. The emotional turmoil stems from the many uncertainties they face – not knowing whether the prescribed treatment will work, how long they have to live, if the cancer will come back and how to plan for a future riddled with unknowns. According to the American Cancer Society, 1.8 million new cancer cases were diagnosed in 2020 and more than 600,000 lives were lost because of the disease in the same year.

Reducing anxiety and increasing efficiency is a recurring theme in the work of Terrence August, Associate Professor of Innovation, Technology and Operations, and Jerome Katzin Faculty Fellow. The uncertainties associated with cancer and its emotional toll on patients has led him to study cancer survival rates with co-researcher David Schkade, Professor of Economics and Strategic Management at the Rady School. The study is supported by the J. Katzin Chair in Corporate Governance Endowed Fund.

Cancer survivors often hold on to what they learn about the chances of survival early in their diagnosis, not realizing the extent to which survivorship improves with ongoing treatment and periodic evaluation, says August. As the research project nears completion, the findings have the potential of helping patients feel more hopeful about their chances of survival.

“We can frame an already difficult cancer journey in a more beneficial light that emphasizes positive progress and helps to reduce anxiety for patients,” says August. “Our effort in this paper is to try to show people how cancer survival curves change as time goes on so that they can be more grounded in reality. There are some terrible cancers, but there are many cancers that people survive. That we can help patients see the more positive, updated survival prospects throughout a difficult journey has been really exciting.”

Powering Insights on Decision Making

August’s research has focused on the economics of information technology, in particular, the economics of cybersecurity, as well as the management of congestion externalities and problems in the health care industry.

The idea for “Network Software Security and User Incentives,” published in 2006 in Management Science, occurred to August when there was a security attack on the web servers of a startup where he was working at the time. Part of a widespread attack which came to be known as “Code Red,” it sparked his interest in what motivates companies to patch and protect their systems from cyberattacks.

The opportunity to find answers presented itself when August was a PhD student at the Stanford Graduate School of Business. He and coauthor Tunay I. Tunca compared four policies to manage network software security in the context of both proprietary and freeware software – consumer self-patching; mandatory patching; patching rebate; and usage tax. They found that in an environment when the security risk and patching costs were high for proprietary software, patching rebates were most effective in inducing patching behavior. However, when the patching cost or the security risk was low, self-patching worked best.

The results suggested that both the value generated from software and vendor profits can be significantly improved by mechanisms that target user incentives to maintain software. For August, the breakthrough understanding of user behavior provided valuable insights on how people make decisions in situations involving security.

“We started looking at different security-related topics using the foundation we’d built,” he said. “Who will patch? Who won’t? And how do I incentivize this system even a little bit to get closer to an efficient level? You don’t want everyone to patch because it’s costly and some risky behavior should exist.”

The research on cancer survival has a similar goal, he notes.

“I’m after improving efficiency and helping people make better decisions. As a theorist, I'm observing things in the world that seem stuck on bad outcomes and I ask how can I build models that give insights to inform behaviors in that area, to get it a little more ‘right’?”

A Nonlinear Thinker

For August, thinking out of the box and finding opportunities in life’s challenges began early. His father was in the Air Force and the family lived in eight states during his school years. One of those moves was from Tennessee to Georgia in the middle of his junior year in high school.

“That was a little awkward, I’d say, given that everyone had known each other forever. Not an easy transition.”

However, August quickly found a way to make the best of the situation. His new high school in Savannah had a strong math and science focus. He found his stride excelling in academics. The program’s rigor prepared him for college.

A serious student who also played tennis and football, August earned his bachelor’s and master’s degrees in chemical engineering from Vanderbilt University. He worked with the research and development team in the Brita division of Clorox where he learned about manufacturing, vendors, components, operations, and quality. His next job was in software development at a New Jersey startup.

The combined experiences sparked his curiosity, helped him discover his areas of interest and laid the groundwork for his future in academia. He went on to earn his PhD in Operations, Information and Technology from the Stanford Graduate School of Business.

Research that Remains Relevant

All but one of August’s 11 primary research papers have been published in Management Science and Information Systems Research, leading journals in his areas of research. The other paper appeared in Marketing Science, a top journal in marketing. His research remains germane in new, exciting ways. His investigation of the viability of software patching feels especially meaningful today because it provides insights into how we make decisions during a crisis such as the COVID-19 pandemic.

“Who will patch and who won’t? How do I target those who won’t? These questions can help us when thinking about vaccinating against COVID-19 because as more people vaccinate, the risk goes down and alters the incentives.”

In another paper he co-wrote with his Rady School colleague Dr. Hyoduk Shin, Associate Professor of Innovation, Information Technology and Operations, August argued for the same day release of movies in theaters and video. The researchers saw this as an opportunity to expand the market of viewers, particularly for blockbusters and children’s movies that are likely to be watched multiple times. Though studios did not adopt the strategy at the time when the research was published several years ago, same day release has become increasingly common since the onset of COVID-19.

“The pandemic disrupted the movie industry and allowed studios to finally collect much more interesting data once their hands became tied. In the 2020s, it will be exciting to see what they have learned and the path they will choose going forward.”

In a forthcoming paper on the economics of ransomware, August is studying modern ransomware variants and their impact on incentives. Working with co-author Duy Dao, a former Ph.D. student, and his colleague Marius Niculescu from Georgia Tech, August has examined the impact of ransomware attacks on software markets. He concluded that when consumers have an opportunity to mitigate losses by reluctantly paying out ransom to malicious actors, they may still be better off than being hit with a cyberattack without a ransom demand.

“We know ransomware is terrible but it has some upside, ” he said.

An Inspiration to Students

August joined the Rady School in 2007, excited by the opportunity of becoming part of a business school still in its infancy. He felt encouraged when school leaders told him he could teach operations in whatever manner he saw fit. He has thrived as a professor in the institution’s strong culture of innovation. He is invigorated by the opportunities to collaborate with colleagues.

With his curiosity, approachability and upbeat persona, August consistently wins praise for his teaching, research and commitment to student excellence. He has won three Excellence in Teaching awards, four Most Valuable Professor awards and the Chancellor’s Associates Faculty Excellence Award for graduate teaching.

August admits that he pushes his students to grow intellectually. He inspires them to be curious, determined and develop the ability to work with unknowns. He encourages his Ph.D. students to focus their energy on quality rather than quantity.

“If you’re someone who’s hoping to just check the boxes, it’s going to be terrible for you. I really want to nurture my students.”

August takes great pride in the achievements of his students. They have won the MIT Operations Simulation Competition four times in the 15 years since its inception. The annual event involves an online simulation game where teams of students from around the world compete against each other to run the most profitable factory.

“We get really good students at Rady who are highly motivated and love the competition. Proud alums come back to campus and remember winning these contests. They love it.”

In addition to teaching and research, August has served in a variety of roles at Rady and in the broader UC community. As co-director of the Rady MS in Business Analytics (MSBA) program, he has provided oversight for admissions, capstone projects, curriculum and technology, student affairs and career placement. He served as a member of the UC San Diego Data Analytics Initiative Working Group and the university’s Academic Senate Committee on Academic Information Technology, and as the degree program faculty reviewer for the MSBA programs at UCLA, UC Irvine, and UC Riverside. He has given more than 50 invited lectures and conference presentations at leading academic institutions and field conferences at the national and international level.

What’s next for August? He looks forward to bringing his research projects in progress to fruition. He would like to focus future research on cancer and other health care-related topics. Nurturing more Ph.D. students is a priority as well.

“We’ve got the MSBA running well. My research has been doing well. I look forward to time to reflect on all of the good we have here at the Rady School. It’s truly an excellent school.”