Thursday, August 25, 2011

MBA Professors: The Most Popular 10

NYU's Damodaran, tops on the list
What makes an outstanding business-school professor? Ask a few MBA students, and you might get a dozen answers, a dozen criteria, and many examples. 

Many will say the best professors are those who teach with passion, energy and excitement. The subject matter--whether it's first-year corporate finance or the mechanics of an intermediate-accounting course--comes alive. Those are the professors who present the principles of debit-credit accounting or the equations of Black-Scholes in a spirited way--as if they discover gold time and again.

Many will say the best are those who share details, memories and stories of having been on the front lines of business, those who were involved in heavyweight corporate strategy, major acquisitions and tense negotiations. They might be adjunct professors who can convey decades of experience within the outlines of a core course. They may have spent years on Wall Street, in boardrooms, or in Europe or Asia in special assignments.

Others will say the best are those who encourage and spawn new ideas. They have new theories or are preparing to unveil a batch of new ideas. They nurture innovation and clever ways of thinking. They have new ways of looking at stagnant business models. They offer new ways to value corporations or manage large organizations.  They cheer for and support students who have entrepreneurial instincts and interests.

A few weeks ago BusinessWeek tried to identify who might be the top (or favorite? or preferred?) professors in top business schools. (See It polled over 3,700 students at 30 business schools to come up with a top-10 list. Students were asked to name a favorite or popular professor on campus--not much more than that.  No criteria, no explanations.

At least 60 students from a school needed to respond to allow that school's results to be included in  national polling. A professor who made the final list received at least 20% of all votes on that campus. Students weren't required to explain why they preferred a professor, but could provide commentary.

Eight of the top 10 professors were from Consortium schools (and suggest the high probability that Consortium MBAs have had some interaction in the last few years with some of the country's most popular professors).  BusinessWeek presided over a popularity contest and promoted it just as that.  Students approach the MBA program and learning seriously, so they likely voted fairly. Not necessarily based on the grade they received. Or maybe the final grade spurred them to participate and vote.

Aswath Damodaran, a finance professor from NYU-Stern, topped the list. His specialty is corporate finance, more notably the equity valuation of companies. He's so popular that he has over 4,000 followers in Twitter. He has a Ph.d. degree from Consortium school UCLA-Anderson and taught at Consortium school UC-Berkeley-Haas before joining the staff at Stern. 

Damodaran writes a popular blog of corporate-finance topics, helpful for both students and practitioners on Wall Street (  In the past month, he blogged on such topics as "trapped cash" in corporations and the "equity risk premium." This week he offers rambling, reasoned "musings" on the share price of Bank of America. It's not just the topics he blogs on, but the enthusiastic, ponderous ways he shares ideas in finance.

Finance instructor Jim Nolen from Texas-McCombs was third on the popularity list. Students say they like him because he's a story-teller with a Texas accent. Nolen is an expert in small business and new-venture financing.  He teaches a popular course in financial management of small enterprises.  Texas students say they are entranced by his stories and experiences in business. According to BusinessWeek, they adore--most of all--how he has helped placed students in lucrative roles in finance.

Emory's Raymond Hill, a finance professor, was sixth on the list. Hill brought years of business experience before he joined Goizueta. He spent 11 years in investment banking at Lehman Brothers and over a decade at the utility Southern Company. He started out in academia, switched to investment banking and business, but returned to the campus. (He has a Ph.d. from MIT.)

At Lehman, he spent seven years in its Hong Kong office managing banking activities in Southeast Asia.  At Emory, he specializes in energy finance and project finance. Students cited his ability to relate arcane, difficult theory from texts (macroeconomics, e.g.) to current events and trends. 

Sharon Oster, an economics professor from Yale-SOM and its dean until a few weeks ago, was seventh on the list. As a woman in economics and business management, she has long been regarded a pioneer, having been at Yale for 37 years.  She specializes in economic competition, competitive analysis, and labor economics.  She has written extensively on regulation and non-profit management.

Students highlight her devotion to Yale's program and its students. Some say she tries to keep ties to every student she has taught while at Yale-SOM and can often prove it.

Other Consortium-school professors on the list include Gautam Ahuja, a strategy professor at Michigan-Ross (2nd on the list); Terry Taylor, an operations and technology management professor at UC-Berkeley-Haas (5th); Neil Morgan, a marketing professor from Indiana-Kelley (8th), and Eric Sussman, who specializes in real estate and accounting at UCLA-Anderson (9th). That Sussman is known to sing 1980s pop songs in class doesn't hurt his popularity.

BusinessWeek all but apologized that Oster from Yale is the only woman on its list. Students don't necessarily prefer male professors. The scarcity of women is likely due to the fact that women still comprise small numbers of experienced faculty members at business schools. And that is likely due to the lagging percentages of women at top business schools and women who pursue doctorates in finance, economics or business.

Being male isn't sufficient to be on the list, but it surely helps to have passion about the subject matter. And it helps to have an ability to tell stories, share experiences, write colorful blogs, keep the material relevant, be an unabashed promoter of the school, help in career placement, and maintain ties to most students who pass through the doors.

Tracy Williams

Wednesday, August 17, 2011

One Thing for Certain....

Uncertainty. It drives equity markets insane, causing them to swoop, surge, nose-dive and rumble upward, only to swoop and surge again. Investors can't figure out whether to ignore, reallocate, hold or sell. Speculators and high-frequency traders find ways to thrive, often spurring markets toward a  plunge and or meddling to make them bounce like ping-pong balls.

Such is the way it has been in this August of market turbulence. It has felt too much like autumn, 2008.

At financial institutions--especially at large banks, investment firms or trading houses--uncertainty in the marketplace leads to a degree of certainty in-house.  When markets bounce all over the place and when ongoing threats to a reviving economy slow it down, there are predictable, certain patterns within banks' walls. Examples?

1.  When markets turn downward or signal a downturn of any kind, even if momentary, financial institutions "circle the wagons." They assume worst-case scenarios in revenues, business, outlook, and opportunities. They hope for a prompt upturn, but plan for the worst.

They examine deals in the pipeline and business and transactions not yet closed. They go through business or balance-sheet "stress tests" to see how they can withstand a collapse in markets or business activity.

2.  Financial institutions begin to reassess, retrench and respond.  All of a sudden, with revenue declines looming, they look to cut costs. And personnel costs are the easiest and first to slice. With certainty, they reassess recruiting and hiring and lower projections for how many they plan to bring in over the next year.

3.  With the prospects of a diminished flow from deals, clients and new business, they huddle up to reassess bonus payouts. They outline cost-cutting and layoffs. Shortly thereafter, they communicate to employees, analysts, and media the cost-cutting campaigns that will come from lower bonuses and planned staff reduction. While investors applaud their efforts to retrench, employees and new recruits begin to worry.

Unfortunately this atmosphere of anxiety becomes a distraction from winning new business, planning new products or bringing in new clients. The managing director who normally flies off to Chicago to see a client is now forced into morning sessions to decide how much year-end bonuses should be scaled back and what group should be hit the hardest. The vice president who gathers a team to explore a new business strategy now wonders whether senior managers will have time to pay attention to the new idea.

4.  Often with uncertainty and volatile markets, banks get risk-averse. With the prospects of lower revenues, they don't want to worsen troubled times with bad investments, bad loans or bad business decisions. A deal, transaction, or investment that was smoothly approved in good times is shelved, pushed back or ignored in times of uncertainty.

Some institutions promised they would carry lessons from other crises, especially the lesson of being disadvantaged by acting too quickly or too rashly at the hint of a downturn. Does it make sense, they wonder, to retrench and retreat too swiftly, only to be forced to gear up, ramp up and rehire when business begins to flow again? Some retain the lessons; many others follow the familiar pattern of gear-up, retrench, lay off, rehire, expand and are comfortable with bearing the related administrative costs.

Experienced MBAs and professionals in finance know these patterns well and have learned how to adapt to them, even if they aren't comfortable going through them. New professionals and recent graduates learn fast that this is often the way of the world of volatility and instability.

Both the old and new understand the importance of concentrating on what they can control--working hard and performing at high levels. They also realize that underneath the piles of spreadsheets, projects, and presentations and in the midst of attending non-stop meetings on confronting the worst case, they must have a Plan B.

Tracy Williams

Wednesday, August 10, 2011

A Summer Reading List?

Summer reading lists.  Everybody tends to have a list of books they want to read, they need to read, or they prefer to read, when the days and weeks before Labor Day mean half-hearted attempts to focus on work or dreamy moments of a planned vacation.

In finance the past few years, there has been an explosion of published accounts of the financial crisis. Just when we think there is nothing else to report or analyze as it relates to the collapse of Lehman, Bear Stearns or AIG, out comes another 300-pager.

Then comes the summer of 2011. Just when we thought it might be safe to escape for vacation and tote copies of what's on our reading list (in duffel bags or imbedded in a Kindle), the circus of Washington becomes more frenzied. And the markets behave as if it's 2008 all over again.

A summer reading list at a time like this? With the daily chaos of global markets, political fisticuffs over sovereign debt levels, S&P punishing politicians and the U.S.'s lackluster recovery, will there even be time to go on vacation before fall arrives?

Is there any point to combing through an old analysis of the Madoff scandal, Goldman Sachs' "big short" on mortgage markets, or Countrywide's massive buildup of subprime assets when nobody knows what today's markets and business confidence will look like next week? When much of the industry had hoped to be gazing at the horizon from a vacation rental?

Still, prospective students in finance will ask what's appropriate to read as they prepare for business school or gear up for a tough semester of corporate finance 101.  MBA alumni and other experienced professionals wonder what they can read to catch up on current issues.

What can they read to "stay ahead in the game" or have an in-depth understanding of specific topics? What should they read to comprehend the controversy of derivatives, CDOs, and mortgage-backed securities? What should they read to figure out what happened at Madoff, AIG, Merrill, and Goldman? Why did some hedge funds prosper during the old crisis? Could Bear Stearns and Lehman have been rescued? With pending reform, what will banking and finance look like in the next decade?

Publishing houses have flooded the book-reading public with new takes and versions on what happened in 2007-09. There are numerous viewpoints, analyses, and updated summaries of events. In the latest round, William Cohan follows his thorough accounting of the fall of Bear Stearns ("House of Cards") with a new book on Goldman Sachs, a book project he likely had in mind for years. But he might have updated his approach when Goldman suddenly became a symbolic punching bag as industry recovered from mishaps of the 2000s. 

Cohan's "House of Cards" was an excellent, day-by-day account of Bear Stearns' fall and explained better than others how lack of funding, liquidity and perhaps wisdom and morals caused the firm to sink.  His understanding of investment-bank operations, people, deals and history would make the new book "How Goldman Sachs Came to Rule the World" required reading.  Goldman, of course, doesn't rule the world, even if it tried to, but Cohan provides a solid accounting of how a top firm manages to remain perennially profitable.

Last year, Suzanne McGee hopped on the Goldman story-telling bandwagon with her book "Chasing Goldman Sachs." She argues the crisis of 2008-09 is partly due to other firms and funds trying to "be like Goldman." Everybody wants to achieve similar returns and approach businesses and markets in the way Goldman does. And they think they can do so--whether or not they have the capital or people.

In doing so, we got the near collapse of the financial system in 2008.  Her book, however, offers pages of solutions.  She suggests an overhaul of investment banking and recommends the industry be operated as a public utility if it doesn't learn to manage risks. McGee knows she won't win fans in the industry with this idea, but hints this may be inevitable if more crises ensue.

Joe Nocera, a New York Times op-ed columnist, teamed with Bethany McLean to write the consummate book on how mortgage markets spurred the crisis:  "All the Devils Are Here." They write fascinating accounts, for example, on the internal failings and politics at Countrywide, at Washington Mutual, at Merrill Lynch (before BoA acquired it), and among regulators.  They spare readers some of the technicals. Instead they present the drama of bankers and mortgage brokers hustling to become rich from originating and selling subprime loans.

For just one summer, the list is almost too much to choose from.  Gretchen Morgenson, a Times business columnist, and Joshua Resner paired up to pinpoint leaders who were responsible for the troubles at Fannie Mae and Freddie Mac in "Reckless Endangerment."   Times business columnist Diana Henriques offers her account of the Bernard Madoff scandal in "Wizard of Lies."  She was the first journalist to interview Madoff in prison. Roddy Boyd, not from the New York Times, jumped in to tell the tale of what happened at AIG, or more notably how its derivatives-trading unit contributed to the mortgage mess: "Fatal Risk."

One new book sought to explain the mechanics and virtues of high-frequency trading, although nobody has yet written the book on last May's "flash crash," a subject that might be too cumbersome for a general reading audience.

Even with the cascade of books, nobody has sufficiently tackled the pressing issue of how banks will evolve and be profitable in the face of new regulation and reform.  Many argue that greater amounts of capital help banks survive or withstand tough times.  But not many have figured out ways for banks to achieve reasonable returns, when more capital will be required.  Banks themselves are struggling to figure this out.

And nobody dared to touch the impact of the crisis and subsequent upheaval on diversity? Have the events the past few years discouraged those from under-represented groups from becoming traders, bankers, investors and researchers? Why does it seem as if there are fewer women and people of color in top levels in financial institutions?  Do banks, insurance companies, and hedge funds care as much? 

For now, for this late-summer period of stomach-churning volatility, most will agree on one thing: Not many right now will want to read a book about bipartisan quarrels and political jockeying occurring on Capitol Hill.

Tracy Williams

Tuesday, August 2, 2011

Team from Tepper Takes ELC's Prize

A Carnegie Mellon quintet of MBAs faced challenging competition from teams from USC and Michigan, but managed to emerge as the winner of the Executive Leadership Council's (ELC) annual business-case competition in Alexandria, Va. in May.  (See The USC and Michigan teams followed in second and third place, respectively.

Exxon Mobil and ELC sponsored the annual competition. ELC has presided over the competition since 2002. This year the topic was energy and the reduction of greenhouse gases. Students from top business schools were asked to present a detailed business strategy outlining America's transition to lower greenhouse gas by 2030 in the most cost-effective way.

Carnegie Mellon's winning team from the Tepper School earned over $35,000 in scholarships.  The team from Tepper, a Consortium school, included recent Consortium graduate Jacob Garcia.  Other team members included Jesse Alleyne, Ian Buggs, Felix Amoruwa, and Richard Burgess. (USC and Michigan are also Consortium schools.)

Team captain Amoruwa told ELC organizers his group sometimes worked until 3 a.m. to work on the project and had follow-up meetings the next morning at 8 a.m. He said the group's effort "truly paid off for us."

The project was expansive. Teams had to outline plans for the nation to meet energy goals without incurring excessive costs. They had to identify areas of public and private investment and job growth.  And they were required to specify ways to recruit more African Americans and other under-represented minorities to work in energy.  Over 50 teams from business schools across the country participated.

The Carnegie Mellon team will be honored at the ELC's annual gala dinner in Washington, D.C., in October.  The team will also participate in leadership activities in New York in the fall.

Consortium student Garcia graduated from Tepper in May, where he concentrated in marketing, strategy and quantitative analysis. Tepper student Alleyne, a rising second-year student, was also a winning participant in case competitions sponsored by McKinsey and Deloitte. Buggs, a recent Tepper graduate, was president of the school's graduate business association. 

Tracy Williams