Firms with real options thrive in uncertain situations because they have the flexibility to change their operations in a way that can amplify the effects of good news and dampen the effects of bad news. Photo via Getty Images

Volatile markets look a lot like high-stakes poker games. Wild swings make it hard to chart a course to profitability, inevitably forcing some firms to fold. At the same time, there are always investors and firms that come out as big winners. So is there is a secret to drawing a winning hand in bad times?

Working with colleagues Evgeny Lyandres of Boston University and Alexei Zhdanov of Pennsylvania State University, Rice Business professor Gustavo Grullon hypothesized that the secret to surviving market volatility has to do with managers' ability to adjust operations. The more flexibility managers have to change the course of their firms, the reasoning went, the greater the likelihood of surviving market volatility, and in some cases taking advantage of it.

Consider Amazon, founded in 1994 with the goal of becoming "the world's most consumer-centric company, where customers can come to find anything they want to buy online." From its start as a bookstore, the company turned into an ultra-diversified behemoth that can shrug off vast swings in the market. Despite high volatility in recent years, Amazon's stock price increased roughly 39 percent, from $1,901 to $2,641, over the past year.

Grullon and his colleagues theorized that having more real options ⁠— managerial choices about tangible assets such as inventory, machinery or buildings ⁠— boosts firm value in a whole range of volatile circumstances, whether demand-based, cost-based or profit-based. Firms that have these options ⁠— Amazon, for example ⁠— can act fast to mitigate bad news by changing operating and investment strategies. They might cut production, shutter operations or delay investments. Companies without these tools basically have to ride fate's rollercoaster.

To test their theory, the researchers compared firms with a plethora of investment opportunities to those with more modest real options. They analyzed returns data from 1963 to 2018 from The Center for Research in Security Prices and from Compustat ⁠— a database of financial, statistical and market information about active and inactive U.S. companies.

Grullon and his team found there was measurable value in having more real options. A bigger spread of real options allowed managers to change strategy as soon as new information arrived. The greater the number of real options, the greater the flexibility managers had at their disposal when the market got volatile.

Developing Amazon-type options and diversified assets, naturally, takes years of sweat, trial and a measure of luck. Companies that do best at creating such opportunities, the researchers note, tend to be highly sensitive to changes in volatility to begin with, leading to more opportunities to adapt. Overall, the team found, volatility-return relation was much stronger in industries already characterized by plenty of growth and strategic options. High-tech firms, pharmaceutical companies and biotech companies, for example, show especially strong resistance to idiosyncratic volatility.

In other words, while volatile markets can resemble high-stakes poker, there are a few predictable rules. When the chips are down, companies that are lucky enough to hold diversified assets, have varied investment options and can shuffle resources quickly will be the strongest players at the table.

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This story originally ran on Rice Business Wisdom. It's based on research by Gustavo Grullon, a professor of finance at Jones Graduate School of Business at Rice University.

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Houston femtech co. debuts new lactation and wellness pods

mom pod

Houston-based femtech company Work&, previously known as Work&Mother, has introduced new products in recent months aimed at supporting working mothers and the overall health of all employees.

The company's new Lactation Pod and Hybrid Pod serve as dual-use lactation and wellness spaces to meet employer demand, the company shared in a news release. The compact pods offer flexible design options that can serve permanent offices and nearly all commercial spaces.

They feature a fully compliant lactation station while also offering wellness functionalities that can support meditation, mental health, telehealth and prayer. In line with Work&'s other spaces, the pods utilize the Work& scheduling platform, which prioritizes lactation bookings to help employers comply with the PUMP Act.

“This isn’t about perks,” Jules Lairson, Work& co-founder and COO, said in the release. “It’s about meeting people where they are—with dignity and intentional design. That includes the mother returning to work, the employee managing anxiety, and everyone in between.”

According to the company, several Fortune 500 companies are already using the pods, and Work& has plans to grow the products' reach.

Earlier this year, Work& introduced its first employee wellness space at MetroNational’s Memorial City Plazas, representing Work&'s shift to offer an array of holistic health and wellness solutions for landlords and tenants.

The company, founded in 2017 by Lairson and CEO Abbey Donnell, was initially focused on outfitting commercial buildings with lactation accommodations for working parents. While Work& still offers these services through its Work&Mother branch, the addition of its Work&Wellbeing arm allowed the company to also address the broader wellness needs of all employees.

The company rebranded as Work& earlier this year.

Rice biotech studio secures investment from Modi Ventures, adds founder to board

fresh funding

RBL LLC, which supports commercialization for ventures formed at the Rice University Biotech Launch Pad, has secured an investment from Houston-based Modi Ventures.

Additionally, RBL announced that it has named Sahir Ali, founder and general partner of Modi Ventures, to its board of directors.

Modi Ventures invests in biotech companies that are working to advance diagnostics, engineered therapeutics and AI-driven drug discovery. The firm has $134 million under management after closing an oversubscribed round this summer.

RBL launched in 2024 and is based out of Houston’s Texas Medical Center Helix Park. William McKeon, president and CEO of the TMC, previously called the launch of RBL a “critical step forward” for Houston’s life sciences ecosystem.

“RBL is dedicated to building companies focused on pioneering and intelligent bioelectronic therapeutics,” Ali said in a LinkedIn post. “This partnership strengthens the Houston biotech ecosystem and accelerates the transition of groundbreaking lab discoveries into impactful therapies.”

Ali will join board members like managing partner Paul Wotton, Rice bioengineering professor Omid Veiseh, scientist and partner at KdT Ventures Rima Chakrabarti, Rice alum John Jaggers, CEO of Arbor Biotechnologies Devyn Smith, and veteran executive in the life sciences sector James Watson.

Ali has led transformative work and built companies across AI, cloud computing and precision medicine. Ali also serves on the board of directors of the Drug Information Association, which helps to collaborate in drug, device and diagnostics developments.

“This investment by Modi Ventures will be instrumental to RBL’s growth as it reinforces confidence in our venture creation model and accelerates our ability to develop successful biotech startups,” Wotton said in the announcement. "Sahir’s addition to the board will also amplify this collaboration with Modi. His strategic counsel and deep understanding of field-defining technologies will be invaluable as we continue to grow and deliver on our mission.”