The Vanderbilt Health Care Conference and Career Fair hosted more than 500 participants and 35 companies at a one-day session in Nashville this past fall. It was the fourth year for the student-organized conference, which is designed for anyone interested in the intersection of business and health care.
Headlining the October event was Nancy-Ann DeParle, Deputy Chief of Staff to President Barack Obama. Drawing on her experience as Director of the White House Office of Health Reform, DeParle outlined the contrast in the national health care system prior to passage of the 2009 Patient Protection and Affordable Care Act and what it will look like once the plan is fully implemented.
Where We Were
Health insurance premiums doubled: Family premiums for employer coverage rose from nearly $6,000 to more than $13,000 between 1999 and 2000.
Insured Americans and businesses paid a hidden tax: Up to $1,000 of uncompensated care was shifted from the uninsured to already-insured families. In 2008 we spent $43 billion on uncompensated care.
Millions lacked quality, affordable health care: 50 million Americans were uninsured in 2009, and millions more lacked access to quality care, preventive services and catastrophic protection when ill or injured.
People with pre-existing conditions were locked out: As many as 129 million Americans have a pre-existing condition that could limit access to insurance.
A career fair held at the Nashville Convention Center was one of the highlights of the Vanderbilt Health Care Conference.
“Even after spending almost twice as much per capita on health care as every other industrialized country in the world, we continue to rank near the bottom when it comes to health care outcomes,” DeParle said. “Those of you working in health care understand that this is bad for business. Imagine you’re selling cars. If cars become more expensive, but the quality stays the same, or even gets worse, you don’t need an MBA … to realize that you’re in trouble.
“Health care isn’t like most other industries. If people can’t afford insurance, they don’t stop coming to the hospital. They just stop paying for the care they receive. So to tweak the analogy that I just used, not only are customers not buying cars, but you have to hand them out for free. That’s not sustainable.”
What the Law Does
Allows young adults to stay on their parents’ policies: More than 1 million 18- to 26-year-olds have benefited.
Gives uninsured with pre-existing conditions affordable insurance: The Pre-existing Condition Insurance Plan has covered more than 30,000 people and is a bridge to 2014 when discriminating against anyone with a pre-existing condition will be illegal.
Protects retiree coverage: $5 billion is provided to keep coverage affordable for early retirees in more than 6,600 plans.
Expands community health centers and workforce: Clinics can serve nearly 20 million more Americans, adding 16,000 primary-care providers during the next five years.
Holds health insurers accountable: The law implements a patient’s bill of rights, eliminates double-digit rate hikes without review, guarantees that overhead expenses are held in check, and promotes pricing transparency among health plans on healthcare.gov.
Creates a competitive and affordable insurance marketplace: Starting in 2014, consumers will be offered the same health plan choices as members of Congress. Tax credits and Medicare coverage will be made available to ensure that coverage is affordable for families and small businesses. The law also protects existing employer-based coverage while ensuring that all Americans who can afford it get health insurance, increasing the insurance purchasing pool, ending pre-existing condition exclusions, and eliminating the “hidden tax” of cost shifting.
Lowers cost and improves quality: Health care fraud persecutions are up 85 percent, and billions have already been saved. The law promotes prevention and offers incentives to reduce hospital readmissions and conditions acquired in health care facilities. It also provides tax credits to small businesses and relief for seniors. There was record low growth in national health spending in 2009 and 2010.
“I’m not saying it’s going to be easy for us to make all of these changes,” DeParle said. “But what I’m saying is the framework is there and the incentives are there in this new law.
“Do we embrace this new law, this new world of health reform, as a first step and work together to make it better? Or do we fight to restore an unsustainable status quo that left millions of our neighbors on their own in their time of need?”
A version of this article originally appeared inVB Intelligenceon Nov. 17, 2011.
Generation Y, the first group to come of age in the Internet era, is all grown up and ready to launch the next wave of multibillion-dollar tech companies. And investors are ready to help them do it.
“If you’re 20-something and have an idea of what you want to build, you can go out and build it,” Harj Taggar, a partner at the Silicon Valley incubator Y Combinator, told the Financial Times in a recent story, echoing the tech boom of the late 1990s.
But after a dizzying decade that ushered in everything from Google’s search engines to touch-screen tablets—and plenty of flops in between—how much more technology are consumers willing to adopt?
It’s a critical question that Mark Ratchford, Assistant Professor of Marketing at the Owen School, is helping companies explore with a new tool called the Technology Adoption Propensity (TAP) index.
“Effectively segmenting and targeting customers based on their likelihood to purchase and use new technologies could help firms better capitalize on their high-tech investments,” Ratchford writes in a recent paper for the Journal of Business Research that introduced the TAP index. The study was co-authored by Michelle Barnhart, Assistant Professor of Marketing at Oregon State University.
Mark Ratchford
Similar psychological measurements have been developed previously to gauge a consumer’s willingness to use new technologies. For example, the Technology Acceptance Model (TAM) was introduced in 1986 to explore user acceptance of—or resistance to—various technology-based systems, including email, word processors and the Internet.
Another stream of technology-related marketing research led to the creation in 2000 of the Technology Readiness Index (TRI), which focused primarily on a person’s likelihood of adopting service-based technologies, often related to e-commerce.
The problem with the TRI, according to Ratchford, is that its questions depend on specific technologies, making it increasingly obsolescent since this once narrow area has grown to cover everything from social media to smartphones.
“References to specific technologies grounds the TRI in a particular technological era and limits its usefulness as a measure of overall technological readiness,” Ratchford writes. “Hence, a new scale that measures consumers’ attitudes toward a varied and flexible concept of technology that seamlessly incorporates the specific technologies of each new era would be useful to researchers and marketers.”
The research team developed an initial 47-item psychological battery, based on 17 items included in the TRI and 30 new ones. To make the TAP index shorter without compromising its effectiveness, Ratchford and his co-author winnowed the items down to 14. Those were then aligned with traits that contribute to technology adoption (“optimism” and “proficiency”) or that inhibit adoption (“dependence” and “vulnerability”).
To validate the TAP index, the study asked more than 1,300 survey respondents to answer a series of yes-or-no questions designed to assess their current use of technology products and services. The results were then matched up against findings from the TAP index itself, showing that those who scored highly on the TAP index were the same ones already using technology. Conversely, those with low TAP scores were not likely to be heavy technology users.
“We show that the TAP index can predict consumers’ technology usage behaviors across a range of high-tech products and services,” Ratchford writes. “We expect that, as a more succinct and timeless measurement tool than prior scales designed for a similar purpose, the TAP index will prove to be a robust and useful scale for academics and practitioners alike.”
A version of this article originally appeared inVB Intelligence on Sept. 30, 2011.
The trading volume of stock options has more than quintupled in the past decade, as banks, hedge funds and other traders have flocked to the investments. But retail options investors may be getting left out in the cold, unknowingly giving up as much as $1.9 billion in lost profits during that same time frame, according to new research from Kate Barraclough, Lecturer of Finance and Director of the Master of Finance program, and Bob Whaley, the Valere Blair Potter Professor of Finance and Co-director of the Financial Markets Research Center.
The problem uncovered by the Vanderbilt team happens with put options—contracts that allow owners to sell an underlying asset at a specific price and within a certain time frame. (Put-option holders make money when the underlying asset price declines.)
Because American-style put options can be exercised anytime before they expire—as opposed to European-style options that can be acted upon only at expiration—investors must find the optimal point at which to close their positions. Otherwise they will forgo interest income that’s, in some cases, greater than their expected profit.
In the study, which will be published in a forthcoming Journal of Finance, Barraclough and Whaley develop a model to test when it’s most advantageous for investors to close put-option positions that are deep in the money. In other words, for put options whose underlying asset has declined to such a level that a maximum profit is all but assured, where is the point when it’s more advantageous to close the put-option position and instead collect the net interest income on the cash proceeds?
“A deep in-the-money put has no time value remaining and is priced at its floor value,” Barraclough and Whaley write. “The difference between forgone interest income and the value of future exercise opportunities determines whether the put should be exercised early or not.”
As it happens, professional investors appear to have realized that money is being left on the table. In response, they’ve developed an arbitrage strategy to capture the forgone interest of those who don’t exercise put options when it’s optimal to do so.
Barraclough and Whaley show that more than 3.96 million put options between January 1996 and September 2008—3.7 percent of all put options outstanding—were not exercised when they should have been. That cost long put-option holders more than $1.9 billion during that period.
In its simplest terms, when long put-option holders don’t exercise at the right time, short put-option holders can (and do) come in and snatch interest income.
Why do investors give up this money? One possible explanation lies in the additional trading costs for long put-options investors, according to Barraclough and Whaley. However, even when estimated trading costs are included, the Vanderbilt team still found nearly $1.82 billion in forgone net interest income.
Another reason is that retail put-option investors simply don’t know about—and don’t use—an appropriate early exercise decision rule.
“Both market makers and proprietary firms demonstrate that they know the early exercise decision rule and apply it in a timely and appropriate fashion,” Barraclough and Whaley write. “That is not to say that the nonprofessional traders are behaving irrationally. The costs of learning the early exercise decision rule and constantly monitoring open put-option positions may be too high relative to the perceived benefits.”
(In a similar 2007 study that Whaley co-authored, the researchers found that call option holders gave up an estimated $491 million during a 10-year period for failing to exercise the options on dividend-paying equities at the optimal time.)
Based on the finding of this most recent put-options study, Barraclough and Whaley say the bottom line is that long put-option investors are “implicitly paying a premium for the ability to early exercise that they rarely use.” In addition, market makers and proprietary firms are appropriating the potential gains of those in a short put-option position.
“Among other things, this raises fundamental concerns regarding contract design and market integrity,” they write. “If many option buyers pay for the right to early exercise but either cannot or do not take advantage of it as a result of exercise costs, unawareness of appropriate decision rules, inability to continually monitor open positions, or irrationality, would not the integrity of the market be better preserved with stock option contracts that are European-style?”
A version of this article originally appeared inVB Intelligenceon Feb. 13, 2012.
The following is adapted from a speech given at the graduation ceremony for the Executive MBA Class of 2011.
My name is Alex Nicholson, and I’m 63 years old. A year and a half ago, I began a new job as a trading partner in a startup hedge fund. It’s the best job I’ve ever held—the best boss, the best environment and the most fun work. For the first time, I wake up early and can’t wait to go to work. I invest my own money in the fund, so I’m an owner as well as an employee. It’s also the most remunerative work I’ve ever done. I attribute my newfound success largely to the Vanderbilt Executive MBA program, but my path has been a circuitous one.
Alex Nicholson, who was the oldest in his Executive MBA class, credits the program for helping him reinvent his career.
I was a late arrival to the business world. I was born and raised in Nashville and earned degrees in philosophy and law at Stanford. But after 20 years in California and unfulfilling stints in education research at Stanford and in corporate law in San Francisco, I returned to Nashville to reinvent myself. The family business, Nicholson’s Hi-Fi, which sold audio-video systems and had been successful since 1946, was encountering difficulties in 1987 and needed help. At age 38, I decided to join my father in the business.
Nicholson’s Hi-Fi grew and prospered in the 1990s, designing and installing home theaters, lighting control systems and home automation systems in Nashville’s finest residences. One day in 1998, after I had taken over the company from my father, it struck me that I didn’t know what the hell I was doing running a business with 25 employees and $3.5 million in annual sales. I had had no business education and only minimal on-the-job training. I was managing by the seat of my pants and unsure of every major decision.
I met with Tom Hambury, Owen’s Director of Executive Programs at the time, to ask whether I could benefit from the Executive MBA program. I expected him to say no, that the program was intended for rising midcareer employees at large corporations, who could use the degree to earn promotions and raises. Tom startled me when he responded, “The Vanderbilt Executive MBA is a lock-step, generalist program without specialization. Corporate employees, who are specialists, benefit greatly from the program. However, small-business owners, who have to be generalists, benefit most of all because they need every course in the curriculum.”
Tom was right. To run my business, I needed to learn accounting, human resources, strategy, economics, negotiation, finance, organizational behavior, operations, marketing, leadership, entrepreneurship, and statistics. And so, at age 50, the oldest in my class, I entered Owen in the fall of 1999. I looked forward to getting to know the beautiful Vanderbilt campus, but I ended up sitting in the same building, in the same classroom, in the same exact seat every class for two years. But I loved every part of the Executive MBA program—the professors, the classes, the reading, the students and the teamwork—everything that I had disliked about law school.
“After I had taken over the company from my father, it struck me that I didn’t know what the hell I was doing. I had had no business education and only minimal on-the-job training. I was managing by the seat of my pants and unsure of every major decision.”
—Alex Nicholson
Luke Froeb, the William C. Oehmig Associate Professor in Free Enterprise and Entrepreneurship, taught me where wealth comes from and convinced me to align my political interests with my economic interests. Ray Friedman, the Brownlee O. Currey Professor of Management and Associate Dean of Faculty and Research, taught me to negotiate from a broader perspective so that both sides could come out ahead. Germain Böer, Professor of Accounting and Director of the Owen Entrepreneurship Center, taught me how to start a new company, which made me glad my father had already done it, and I didn’t have to.
My favorite course at Owen, however, was the finance class taught by Bill Christie, the Frances Hampton Currey Professor of Finance and Professor of Law. Before Bill’s class, I didn’t even know what finance was. When I started to read the textbook over the semester break, I couldn’t put the book down. All of a sudden, the big picture of business made sense—companies, projects, debt and equity, dividends and buy-backs, the stock market. My favorite topic was options—puts and calls, profit and loss graphs, synthetic stock positions and real options.
But finance and options had little to do with Nicholson’s Hi-Fi. My purpose at Owen was to learn so that I could help my family business. I tried my best to share with my associates what I had learned. I found that task was much harder than anything I ever did at Vanderbilt. So I went back to the basics: I hired a coach to work on team building, which I considered the most fundamental lesson from Owen. We went on expensive overnight retreats, talked freely to each other and kept careful notes about our commitments to accountability.
None of it worked. I found out that the general manager disliked the salesmen because they could earn more than he could; the salesmen distrusted the technicians to install their systems correctly; and the technicians bullied each other and refused to follow directions from the general manager. Owen had elevated me to a higher plane of business consciousness, but I was unable to raise my company along with me.
After my graduation, the housing boom brought an onslaught of new competition in our industry—from the Internet, from big-box stores, and from local installers without the overhead expense of a retail store. Our revenue plateaued and by 2005 was starting to decline. The company that had supported our family so well for six decades now needed cash infusions from the family to cover its expenses. Soon I was $2 million in debt and unable to see a way out.
I finally realized that I had to let go of the idea of keeping the family business afloat. Remembering my interest in finance, I started taking classes in stock and options trading, which I enjoyed tremendously. In 2006 I sold our warehouse and started reducing my debt. In 2007 I sold the business operations to a Birmingham, Ala. audio-video company that wanted to open a Nashville branch. I made sure that all my employees had positions with the buyer and that all my customers’ jobs in progress were completed. Then I started trading options full-time for my own account. In late 2010 I sold my final parcel of real estate—the retail store, which had stood empty for four years—and paid off the remaining debt.
My solo options-trading career was successful, but my returns were inconsistent, and I felt unfulfilled. My wife, Laurie, encouraged me to find a real job—and get out of the house—while trading options on the side, so I went back to Owen to confer with Debbie Clapper, Associate Director of Executive and Alumni Career Services. She helped me redo my resume, which had been dormant for 25 years, and sent me job postings from Owen every day.
Then early last year, a friend of mine contacted me about a new fund she was starting. The best options trader I’ve ever known, she left the corporate world in 2007 to follow her passion: a charity she founded called Just Hope International, which provides infrastructure projects in the poorest parts of the world. While supporting herself and her charity by trading options, she started a closed hedge fund to allow her former business associates to invest with her.
When we met to discuss her new fund, she offered me the opportunity to invest. As I was about to ask if she needed another trader, she asked me first if I would be interested in working at the fund. Fortunately I had the requisite professional degree and a current resume. During the third interview, I knew she was going to make me an offer. Forgetting everything that Ray Friedman had taught me about negotiation, I jumped directly to my bottom line and said, “This is my ideal job. I know there is no money right now. I’ll work for free until the company can pay me.” She beamed with joy and said, “What a blessing you are to do this for us! But it may be a year or two before we’re profitable.”
Our company, Hope Investments LLC, based in Brentwood, Tenn., trades options and futures on the broad-based stock indices. We have been profitable since the first month and have now paid off our startup costs. A large share of our profit goes to support Just Hope International, the charity for which we are named. There are three partners, including myself, but no additional staff. My boss and other partner also serve as the president and executive director, respectively, of the charity. They are both now working to buy land in Sierra Leone, the poorest country in Africa, so that a self-supporting farm, orphanage, school, church and health clinic can be built there.
The opportunity at Hope Investments has enabled me not only to do well financially but to find a moral direction in my work. For that I have Vanderbilt to thank. Even though my original purpose in attending Owen was never realized, the Executive MBA program was the best educational experience I’ve ever had. Owen has given me the intellectual foundation to support a lifetime of continued learning in the business world. And when my perfect business opportunity came along, my education gave me the confidence to seize the moment—a moment that forever changed my life.
This wasn’t the first time I’d heard that sentiment. In this case, Smoke Wallin, MBA’93, spoke up at a meeting of the Alumni Board in late 2010 as part of a discussion on how the school could move up in the rankings and attract the best applicants. But telling our story meant more than just having our faculty’s work cited in The Wall Street Journal or on Marketplace. To really break through the clutter and claims of other schools, we needed a bolder brand identity that would make the world sit up and take notice, proclaiming loud and clear that we are second to none.
For years, Vanderbilt’s business school has been talked about as a “hidden gem,” a “best-kept secret,” a place that “you’ve got to experience to understand.” Those aren’t entirely bad qualities, and for a long time those attributes helped distinguish us from other top-ranked schools.
However, with an aggressive new strategic plan in place, which includes pushing into the top-20 B-schools amid ever-greater competition for talent, we could no longer afford to be a hidden gem or best-kept secret. Telling our story had become—and remains—a competitive imperative. Below are just a few of the key steps in our yearlong journey.
Step 1
Find a creative partner
In the same way consumer brands tap into renowned advertising agencies to sharpen their edges (and boost sales), we too set out in early 2011 to find a firm to help raise the school’s profile. With the support of an internal advisory board, we screened more than a dozen agencies from across the country, including ones that had worked with other top B-schools. We plowed through a mountain of amazing—and some not so amazing—work, finally narrowing the field to three firms. Each of these finalists presented their capabilities, including a broad array of creative approaches they’d used to help other clients achieve their goals. But in the end we selected an agency in Columbus, Ohio, called Ologie. A highly creative branding agency with about 50 employees, it has a client base that ranges from nonprofits and academic institutions, such as the Cleveland Clinic and Purdue University, to private companies like NetJets and the Food Network. Their creative team blended bold designs with smart, mission-driven content. It was a perfect match for our intimate, collaborative, and yet academically rigorous personality.
Step 2
Prioritize our audiences and objectives
Everyone agreed that we needed to tell our story, and tell it boldly. But who needed to hear it? Obviously prospective students are a core audience. As is the wider Owen community, including faculty, current students and alumni. We also wanted to reach peer schools, which hold sway in the rankings and whose institutions serve as feeders for top student and research talent. But the one constituency that, with Ologie’s help, we learned could really spark a virtuous cycle was corporate recruiters—those who hire our students as interns and graduates. By broadening and deepening our relationships with employers, we’d see a short-term payoff in higher starting salaries and greater job placements. In addition, we hoped to leverage a growing alumni base within select companies to help boost our national profile for the long term and further strengthen the school’s network.
Step 3
Discover ourselves
Now that we knew who should hear our story, the next question was just as important: What story do we want to tell? Each of us can rattle off five or six great things about Vanderbilt’s business school, but honing that message in a way that’s unique, credible and resonant with the people we’re trying to reach is a daunting task. So Ologie started by talking with dozens of stakeholders—faculty, staff, students of all programs and ages, as well as employers. Everyone agreed that “culture” was our single biggest strength. But here’s the rub: No two people described the culture in the same way. What’s more, employers don’t immediately see how our culture benefits their organizations. Ologie worked through this problem and identified a vocabulary for talking about our culture in a way that all audiences would find compelling and beneficial.
Step 4
Create … then listen, listen, listen
Rather than go straight to designing a new series of ads, Ologie first drafted a manifesto—a galvanizing public declaration that explained in clear, energetic terms why this school is special. (Incidentally Apple’s “Think Different” campaign started with a manifesto.)
The agency then brought these ideas to life with a series of mock-ups of advertisements, sample pages from an MBA viewbook, online ads and layouts of all the other materials we use on a day-to-day basis to promote the school. Our job was to take those items back to our audiences and understand what worked, what didn’t and why.
As expected, there were elements that resonated with everyone, such as, “We’re the B-school built for the persistent. The genuine.” There were some that split opinions: Students rallied around “Rewrite the Rules,” for example, but alumni disliked it. And there were other things that were simply best left on the cutting room floor.
Step 5
A breakthrough!
Using this feedback we spent much of the summer refining (and refining some more) the points that proved most salient among all the people we surveyed. Finally we began to see the outlines emerge of what we believe is a profound and truly unique brand narrative for the school.
Step 6
Tell the world
The time had come to begin incorporating these new design and content elements into our marketing materials. The first step involved developing a positioning brochure that homed in on our manifesto in a creative manner. We also worked with Ologie to create an 83-page booklet using stats, facts, quotes, people and places to tell all that’s worth knowing about Vanderbilt’s MBA program. Over a six-week period, we sent these two items to more than 6,000 prospective students as well as 1,000 B-school deans, MBA and Executive MBA program directors. The results? It’s too early to tell, but, if it’s any indication, Jim Bradford got a call from another dean telling him that he liked the book so much that he was going to copy it.
Starting in 2012, we began dialing back our involvement with Ologie. We’re now turning to an extended Nashville-based team of copywriters and designers to help translate Ologie’s new ideas and fresh look into our websites and future marketing materials. Next up is an ad for both print and larger displays, such as at airports.
As you watch these materials take shape, I think you’ll find that they are truly different than anything we’ve done before. And yet, they capture our spirit perfectly—just as we had hoped.
March 7: Michael Burcham, Lecturer of Entrepreneurship, has been chosen as a “champion of change” as part of President Barack Obama’s “Winning the Future” initiative. Burcham was honored at a White House ceremony for his leadership in mentoring the next generation of entrepreneurs.
Bloomberg Businessweek
Nov. 2: MF Global Holdings Ltd.’s bankruptcy, the eighth-largest in U.S. history, is exposing a lack of internal controls that may have prevented a last-minute rescue of Jon Corzine’s futures broker. Hans Stoll, the Anne Marie and Thomas B. Walker Jr. Professor of Finance and Director of the Financial Markets Research Center, is quoted.
Jan. 11: B-school electives have taken a turn for the creative, tackling everything from New York City’s problems to health care to humanitarian relief. In the Fundamentals of Quality Improvement in Health Care elective, students from the Owen School join nursing and medical students to focus on process improvements at Vanderbilt University Medical Center.
CNNMoney
Feb. 3: Worried that the Federal Reserve and the U.S. dollar are on the brink of collapse, lawmakers from 13 states, including Minnesota, Tennessee, Iowa, South Carolina and Georgia, are seeking approval from their state governments to either issue their own alternative currency or explore it as an option. David Parsley, the E. Bronson Ingram Professor of Economics and Finance, is quoted.
Feb. 4: For some, Super Bowl Sunday is all about the game. For others, the ads take center stage. Jennifer Escalas, Associate Professor of Marketing, offers three keys to a killer Super Bowl ad: a meaningful narrative, strong linkage to the brand, and “equity,” which occurs when brands that appear perennially build up a positive association in consumers’ minds.
The Dallas Morning News
Feb. 14: Life-threatening problems persist at Parkland Memorial Hospital and are more widespread than previously known, enabled by a “business as usual” culture that has kept it from fixing serious breakdowns, according to a new report. Ranga Ramanujam, Associate Professor of Management, is quoted.
The Economist
Jan. 3: As Brazil’s economy booms, U.S. business schools are catering to increased interest in the country by seeking new partnerships and programs with local institutions. Vanderbilt’s Americas MBA for Executives program is mentioned.
Financial Times
Jan. 30: The Owen School ranks No. 4 nationally and No. 7 internationally in the human resources category of the Financial Times Global MBA Ranking 2012.
Jan. 30: Interest in joint J.D. and MBA programs is being driven by changes in the demand for legal services, says Dean Jim Bradford.
Forbes
Dec. 2: Insurance is not a wealth redistribution tool in which good risks cover the bad ones to ensure that everyone pays the same rate, writes Larry Van Horn, Associate Professor of Management and Executive Director of Health Affairs.
Jan. 26: Bruce Barry, the Brownlee O. Currey Jr. Professor of Management, is quoted about clichés and jargon used all too frequently in the business world.
Fortune
Nov. 23: MBA applicants from India and China face significantly higher rates of rejection by many top U.S. business schools than either domestic candidates or those from Europe or Latin America, according to a new study by Poets & Quants. John Roeder, Director of Admissions, is quoted.
Dec. 9: The Owen School rose three places to 25th this year in a new ranking by Poets & Quants. The list is a composite of the five major MBA rankings published by Bloomberg Businessweek, The Economist, Financial Times, Forbes and U.S. News & World Report.
The Globe and Mail
March 13: Diverse in scope, new executive MBA programs often share similar features: an international learning component, a blend of in-class and online study, and curriculum delivered by multiple partners. The Americas MBA for Executives program is mentioned.
Investor’s Business Daily
Feb. 14: Companies can teach people to boost their what-if mindsets and can learn how to generate new approaches by working with employees in a number of brain-building drills. For example, David Owens, Professor of the Practice of Management and Innovation, suggests allowing workers to get out from behind their desks and try thinking in a new place. Read more about David Owens.
Politico
Nov. 29: Opponents of Dodd-Frank financial regulations have been emboldened by a circuit court ruling that faulted the Securities and Exchange Commission for failing to determine the full costs of implementing the law. The SEC responded to the ruling by bulking up its Division of Risk, Strategy and Financial Innovation, a sort of in-house think tank created in 2009 to examine the economic impact of the rules. The appointment of Craig Lewis, the Madison S. Wigginton Chair of Management, to lead the division is mentioned.
SmartMoney
Dec. 11: There is one way to steady a stock portfolio without unloading shares: an options strategy known as “covered calls.” The idea is to collect extra income now in exchange for giving up potential gains later. Bob Whaley, the Valere Blair Potter Professor of Finance, is quoted.
U.S. News & World Report
Feb. 23: Business students seem to be increasingly seeking jobs in the policy, technology and management of education, say education professionals. The Owen School is among the top-ranked business schools that have student-run education clubs.
Feb. 29: Three-year programs are increasingly being explored by colleges and college-bound students and parents as a more affordable route to a degree. Others, like Vanderbilt alumnus Ted Griffith, BS’08, MSF’09, earned both a bachelor’s degree and a master’s in four years.
March 13: The Owen School improved to No. 25, three spots better than last year, in U.S. News & World Report’s latest rankings of business schools. Read more about the rankings.
March 21:Read McNamara, MA’76, Executive Director of the Career Management Center, discusses sectors that are hiring and offers advice to B-school graduates.
April 3: Admissions officers at the Owen School discuss what they look for in applicants and what sets the school apart.
The Wall Street Journal
March 28: Alumnus Doug Parker, MBA’86, Chairman and CEO of US Airways, is interviewed about consolidation in the airline industry.
April 5: The Owen School has increased support for job-seeking foreign students by hiring a dedicated career-services staffer for the international contingent; scheduling “how I did it” presentations by international students who successfully secured jobs in the U.S.; organizing job-hunting trips to Asia; and offering webinars to address cultural gaps and identify companies that are more open to sponsorship. Tami Fassinger, BA’85, Chief Recruiting Officer, and alumnus Juan Jose Thorne, MBA’10, are quoted.
Linus Hall is the Owner of Yazoo Brewing Co., which produces several different beers, including the Pale Ale pictured here on the bottling line.
Running a craft brewery requires a personal touch, but few pour themselves into the job like Linus Hall. His Nashville-based Yazoo Brewing Co., which has expanded its reach across the Southeast since opening in 2003, is as much a testament to his handcrafted approach to beer making as it is to the larger aesthetic and philosophy that guide his decisions as a business owner.
“You go down the beer aisle of any grocery store, and it’s mostly run-of-the-mill brands in boring metallic blue cans,” he says. “We try to go in the opposite direction with our brewery by being offbeat and memorable.”
Named for the river that winds its way past Hall’s hometown of Vicksburg, Miss., Yazoo produces nine different types of beer, including a rotating seasonal variety. Several of them have labels featuring paintings by his wife, Lila. “Even though we ended up in Nashville, we wanted to reflect our Mississippi roots in our name and image,” he says. “It’s about capturing that Delta folk-art feel.”
Distinctive as it is, the branding explains only part of Yazoo’s growing popularity. From the outset Hall knew that success hinged not only on the quality of his beer, for which he turned to the American Brewer’s Guild for a craft-brewing course, but also on the quality of his business plan. For the latter he enrolled in the Vanderbilt Executive MBA program, which he says gave him a strong foundation in strategy and operations, as well as a better understanding of what it takes to be an entrepreneur.
Nearly 10 years into it, Hall still gets a heady feeling from being in charge of the business he’s built from the ground up. It’s not unlike the warm sense of satisfaction that his patrons feel after sampling one of Yazoo’s fresh drafts.
“If you don’t get a thrill from what you’re doing, you’re not going to make it,” he says. “For me that thrill is walking into the taproom on a busy night and seeing customers enjoying our beer and having great conversations.
“Beer brings people together, but good beer makes them happier.”
Sheru Chowdhry, MBA’00, laughs about his earliest experience living in New York City. His first apartment was in Times Square, and there was little respite from the noise and lights. “It’s a wonder that I didn’t end up half-deaf and half-blind from all of that,” he says. “It was sensory overload.”
Chowdhry eventually settled on the other side of the Hudson River, where today he and his wife are raising their two children. The move has afforded him a better perspective on the city. “You can’t beat the view of the skyline,” he says. “Of course, I still work in Manhattan, but it’s nice to be able to step outside of it and take it all in.”
In some sense, Chowdhry had to go through a similar shift in his career, and he now appreciates what he does for a living all the more. As Managing Director and Partner at Paulson & Co., a New York-based hedge fund company, he is fully immersed in the investment, or “buy,” side of Wall Street. Among his responsibilities is overseeing Paulson’s investments in distressed securities, such as companies that are entering bankruptcy.
“I love what I do,” he says. “Bankruptcy investing is a good amalgamation of legal, financial and strategic thinking—about how we position ourselves in the capital structure and create value for the investors.”
Prior to Paulson, Chowdhry worked in mergers and acquisitions on the banking side of finance. It was not a good fit, he admits. “I was an M&A banker for three years, but it wasn’t right for me,” he says. “The buy side was calling me.”
Fortunately his Owen experience helped prepare him for the adjustment. “Vanderbilt was one of the best things that happened to me,” he says. “It has such an excellent finance program, and I learned so much from my fellowship working at the Financial Markets Research Center.”
It was this debt of gratitude that prompted Chowdhry to host Owen students during this past October’s Wall Street Week, a tour of several different financial firms organized by the school’s Career Management Center. Chowdhry gave the students an overview of how Paulson’s hedge funds operate, but the opportunity also let him share some advice about working on Wall Street—advice that comes only from having a broad perspective.
“Markets can be taxing, so it’s important that you find that sweet spot and love what you do,” he says. “In the long run, the people who do best are those who enjoy their careers.”
Thomas Felch, MBA’08, writes, “A group of Vanderbilt alumni shook out the cobwebs with a weekend trip to Vail, Colo.” From left, are Lanny Teets, MBA’08; Ellen McGinnis, MSN’09; Justin Terry, MBA’08; Melissa Hunter Duncan, BS’04, MEd’05; Jon Duncan, MBA’08; Bobby MacDonald, MBA’08; Sam Milton, MBA’08; Rebecca Goodyear, BA’03, MBA’08; Chrissy Felch and Thomas Felch.
The Admissions office would like to thank the following alumni for their help in recruiting prospective students. If you would like to be involved in future Admissions events, please email admissions@owen.vanderbilt.edu.
Atlanta
Bella Abel, MBA’09
Matt Abel, MBA’09
Javier Canas, MBA’05
Jared Degnan, MBA’09
Travis Dunn, MBA’11
Astrid Huebner, MBA’09
Erin White, MBA’09Austin
Paige Brown, MBA’10
Michael Chao, MBA’11
Chapin Hertel, MBA’10Beijing
Chuan-Cheng “Tim” Wu, MBA’04Boston
Jack Hartley, BA’04, MBA’11
Charlotte
Katie Branner, MBA’06
Kate Haffey, MBA’11
Hendrix Munowenyu, MBA’07
Wes Wilson, MBA’07
Chicago
Macee Bumpus, MBA’09
Amanda Fend, MBA’09
John Ford, MBA’05
Gaurav Goel, MBA’11
Carrie Rennemann, MBA’07
Dallas
Fred Curcio, BS’03, MBA’10
Allison Earnhart, MBA’10
Michael Metcalf, MBA’09
Gavin Richey, MBA’10
Delhi
Gunish Jain, MBA’98
Denver
Marie D’Englere, MBA’10
Houston
Brooks Despot, MBA’09
Bill Lambert, BE’03, MBA’08
John Robella, MBA’10
Jay Vandenberg, MBA’05
London
Mike McCooey, MBA’02
Los Angeles
Michael Clinton, MBA’07
Josh Gorham, MBA’07
Joe Parise, MBA’10
Jessica Sikca, MBA’09
Serdar Sikca, MBA’09
Courtney Simons, MBA’07
Mexico City
Ramon Montano, MBA’06
Miami
Nathan Hite, BA’02, MBA’10
New York
Dwyla Beard, MBA’11
Andrew Bogle, MBA’04
Justin Ferguson, MBA’11
Henrique Hauptmann, MBA’04
Cam Johnson, MBA’11
Carolina MacRobert, MBA’11
Jonathan McEvoy, MBA’09
David McGroarty, MBA’11
Priya Saha, MBA’06
Simon Schoon, MBA’11
Hunter Young, MBA’11
Philadelphia
Adam Lambert, MBA’10Raleigh
Mike Shapaker, MBA’97
Salt Lake City
Doug Archibald, MBA’10
San Diego
Gwen Murray, MBA’06
San Francisco
José Arellano, MBA’11
Chris Caughman, MBA’08
Emily Dunn, MBA’05
Karen Kremeier, MBA’05
Tapish Kumar, MBA’08
Kelly Leo, BS’03, MBA’11
Keith Whitman, BS’03, MBA’11
Sao Paulo
Luis Berlfein, MBA’97
Fred Muzzi, MBA’09
Eduardo Oliveira, MBA’99
Francisco Pinheiro, MBA’95
This past spring Bruce Brockenborough, EMBA’01, President and CEO of Hannan Supply Co., issued a challenge to the Executive MBA Class of 2011. If they would raise at least $145,000 for their class gift with 100 percent participation, he would pledge money of his own to help launch much-needed scholarships within the EMBA program. The Class of 2011 responded by raising a total of $150,000—the largest amount ever raised by an EMBA class—with every student contributing. Brockenborough followed through as well, and the combined gifts established both the Brockenborough Family Scholarship and EMBA 2011 Scholarship funds, which will provide financial support for deserving EMBA students.
Knight (left) and Bosslet will go just about anywhere to get the interview they’re after.
How did you two end up working together? And what’s the story with this name “Blark!” that follows you everywhere?
Blake: “Blark!” started as an inside joke. It’s a play on our two names.
Clark: In case that wasn’t obvious.
Blake: We flash it at the end of each video as a production credit in the Owen Podcast Series. We didn’t think anyone would notice, but as our first year progressed, our classmates co-opted “Blark!” and began referring to us as a single entity. So I guess at least a few of them had been watching.
Clark: We suspect they started using it because they hadn’t bothered to learn our individual names yet.
Blake: Well, to be fair, we didn’t exactly make it easy for people to differentiate us. We’re both from Texas and we both majored in marketing as undergrads at Texas A&M. We both joined OwenBloggers at the beginning of our first year and started working for the school’s Marketing and Communications office as social media consultants. We both have dark glasses and wives who are arguably out of our leagues. People act like we must be lifelong friends, but one year ago we’d never met.
Clark: Well, that’s not exactly true. As we’ve recently pieced together, we apparently met at a house party as undergrads, just after Blake started dating his future wife, Kristi, who happened to have a couple of classes with me. More than likely, we were loitering around the keg and talking about music, since Blake was in a popular local band at the time and I secretly idolize musicians. And that was it.
Blake: After the chance encounter, we went our separate ways. I had a pretty unique hybrid background of marketing and design, and so I worked for two successful startups in Dallas as their one-man marketing machine. Clark … I don’t even know why he got a marketing degree.
Clark: Yeah, I put it to good use. I started in state and local tax at KPMG and then joined the internal strategy group at Texas Children’s Hospital.
Blake: But Owen brought us back together.
Clark: It was very much like the movie Serendipity.
Blake: Strikingly similar. My wife recognized Clark’s name on the list of admitted students, which prompted an email, which prompted calls, which prompted meeting up before school even started.
Clark: All of which prompted lots and lots of scheming. We definitely both have an innate drive to create stuff when we think there’s a need. Or, in the parlance of our peers, to “blue sky” it.
So how did the Owen Podcast Series come together?
Blake: Early on, we agreed that Owen, and just about every other business school we visited, could have a more robust media library. This would allow prospective students to feel like they really know the school’s people and culture during their search process, even before visiting the campus to experience it firsthand.
“Everyone in this era has built up a natural layer of skepticism, and when you feel a sales pitch coming on, you immediately put up a mental barrier. We wanted the podcasts to avoid that sheen.”
—Clark Bosslet
Clark: This notion was the seed of the Owen Podcast Series, which built upon previous Owen podcasts by adding an interview format and bringing in an eclectic mix of guests, ranging from faculty members to community leaders to local business owners. The goal is to showcase everything that makes Owen and the surrounding community unique.
Blake: Prospective students don’t just care about the curriculum and pedigree of the schools they seek out. That’s important, but they also care about the culture and social activities outside the walls of academia. It’s a package deal, something we were keenly aware of after talking our wives into dropping everything and moving to Nashville. Based on that, we knew that prospective students and their partners want to know they’ll have some fun during the whole grad school experience.
Clark: The city of Nashville has a strong creative class and a strong entrepreneurial spirit. It’s a lot more than a country music scene, or even a health care scene, although it obviously has all of those things, too. We really believe the city is a key part of the Owen value proposition.
Blake: We found the school to be incredibly fertile ground for organic, student-led innovation. Before stepping foot in a classroom, we brought our podcast idea to the admissions team, who saw it as a great marketing tool, not only for prospective students but the Owen community at large. We were then put in touch with Yvonne Martin-Kidd, Executive Director of Marketing and Communications.
And how did the idea go over?
Clark: We were two anonymous, overeager students. They could have easily scoffed. But after presenting our vision, the response was overwhelmingly supportive.
Blake: It was, “What do you need to get going? Cameras? We have HD, Flip, handhelds and studio lights. Microphones? We have lapels and handhelds, all wireless. Anything you need is at your disposal whenever you need them. And, by the way, once you get going we can give you a prominent spot on the new website we’re creating for Owen and possibly include featured podcasts in our newsletters.”
Clark: It was pretty unexpected. They not only signed off on the project, but they wanted to become actively supportive in its success. Blake and I both came from an undergraduate school with almost 50,000 students. Texas A&M has a strong culture of student involvement, but there’s a lot of red tape. In this case, the speed of approval and level of encouragement was incredibly refreshing.
We have a lot of precious commodities right now: time, resources, administrative champions and lots and lots of smart people around us. It’s a recipe for doing some really fun stuff.
How did you become affiliated with OwenBloggers?
Clark: OwenBloggers has always prided itself in leaving off the veneer, so to speak. It’s far less engaging as a member of an audience when you feel like you’re being pitched to. Everyone in this era has built up a natural layer of skepticism, and when you feel a sales pitch coming on, you immediately put up a mental barrier. We wanted the podcasts to avoid that sheen. It needed a home within the constellation of online touch points at Owen, and it found a kindred spirit in OwenBloggers.
Blake: We were both familiar with the site after visiting it many times as prospective students, and we were excited about the opportunity to partner with something that had a built-in audience and an established brand. The site was flush with material and had a broad international readership, but had outgrown the blogging platform it was created on. We met with the current and past leadership of the site, who were already tossing around the idea of moving the site onto WordPress (a popular blog publishing platform).
So you do some programming as well?
Clark: This was all in Blake’s sweet spot. When we found out about the WordPress initiative, I basically volunteered Blake’s Web design and programming expertise to build the new site. The only thing I more willingly offer than my own time is someone else’s.
Blake: We had the opportunity to combine the veteran OwenBloggers site and the yet-to-be-tested Owen Podcast Series into a multimedia conglomerate, the likes of which had never been seen before … at least in graduate student-led media circles … in the southeast United States … to our knowledge.
Clark: We are basically young Rupert Murdochs. I hope he doesn’t do anything stupid before this article appears.
And all of this is in your first month or so as students?
Clark: I think it sounds more ambitious after the fact. At the time, we just wanted to create content. We were excited about starting the next chapter in our lives and about having access to some really great minds. Honestly, the podcast series was mostly an excuse to reach out to interesting people and pepper them with questions, all under the guise of content creation.
“When you see a professor speak passionately about something, it helps you uncover what’s behind the syllabus and understand why Owen students are regarded not only for their spreadsheets
but also their convictions.”
—Blake Knight
How do you decide on which guests to interview?
Blake: We started looking for guests here at Owen, which is ripe with passionate personalities and big thinkers. We wanted to provide a relaxed, intimate look into people whom incoming students would be interacting with their first year. Faculty such as Michael Burcham, Lecturer of Entrepreneurship; Dave Owens, Professor of the Practice of Management and Innovation; and Larry Van Horn, Associate Professor of Management; as well as Read McNamara, Executive Director of the Career Management Center, all sat down with us to talk about what drives them personally and professionally. While we touch on the requisite questions regarding their roles at Owen, we’re really looking to establish the people behind the message and create a real experience for the viewer. Simple lighting, one camera shot, natural settings, and, with the exception of raucous bird squawks and ambulance noises, very few edits.
Clark: In one of our first episodes, Bart Victor, the Cal Turner Professor of Moral Leadership, mentions the Carnegie Bargain, which is the mindset that one must first do well financially in order to have the means and freedom to do good philanthropically. And then we talked about the misplaced focus of many organizations on fixing the suffering of poverty instead of alleviating the poverty itself, which is a key tenant in the Project Pyramid courses here at Vanderbilt. It was, at least in my mind, genuinely interesting stuff, and I think that’s when we realized the true potential within the series. Our litmus test has always been: If I’m a prospective student and I stumble upon this, is this compelling? Does it flesh out my opinion of the school? And if the answer is yes, it has some value.
Blake: I think people really connect with genuine passion. It comes through the screen and grabs you as a viewer. When you see a professor speak passionately about something, it helps you uncover what’s behind the syllabus and understand why Owen students are regarded not only for their spreadsheets but also their convictions.
Clark: Once we had our sea legs, we started looking into the community to find local business leaders who are focused on making Nashville unique. No one would call us shy, but it was still daunting to essentially cold call someone to ask them to be on a podcast that’s still more of an idea than a product.
Blake: As it turns out, we had an ace up our sleeve: being students. People are definitely more receptive to the idea of sitting down with students, especially if they can tell you’ve done your homework and know their craft a bit.
Clark: Blake and I have a certain aesthetic, and that aesthetic is good beer and good music.
Blake: We reached out to local companies like Yazoo Brewery, Third Man Records (Jack White’s label) and Hatch Show Prints and asked for an hour of time with the owners. These are all small shops, so their time is valuable, and they’re not hurting for media coverage, not that we even qualify. But when we prefaced the request with “I’m an MBA student from Vanderbilt,” they gladly opened their doors to us.
Clark: I think that’s a testament to two things—the cachet of the Vanderbilt name and the tremendous sense of community here in Nashville.
Blake: At the end of the day, we really enjoy it. We meet incredible people and talk about great ideas. When our podcast with Ben Blackwell, Director of Operations of Third Man Records, was picked up by the local media, there was an admitted sense of pride in knowing our efforts helped raise the local profile of the school.
So what’s next for “Blark!”?
Clark: The hardest part is not coming up with the ideas, or even initially bringing them to fruition. That’s easy because it’s thrilling and somewhat finite. The hard part is sustaining something once the newness and the sense of accomplishment has worn off a bit. So a big focus for us this year is making sure the podcast series and the website are sustainable. The quick turnover at business schools can kill a lot of good ideas because capturing that institutional knowledge is so challenging. But we are blessed to have some really great peers at Owen right now. There’s a palpable eagerness among the student body to make Owen a better place while we’re here.
Blake: We recognize that this is a unique point in our lives. We have a lot of precious commodities right now: time, resources, administrative champions and lots and lots of smart people around us. It’s a recipe for doing some really fun stuff that’s not only personally rewarding but also reflects well upon the school.
Cheryl Chunn has been named Associate Dean of Development and Alumni Relations. She previously worked as Director of Development, Departmental Programs, for Vanderbilt University Medical Center.
Mark Cohen, Professor of Management and Law, has rejoined the Owen School following a leave of absence as Vice President for Research at Resources for the Future, a noted environmental think tank in Washington, D.C.
Brian McCann, MBA’04, Assistant Professor of Strategic Management, has become a permanent, full-time faculty member.
Fond Farewells
Bob Blanning, Professor of Information Technology, Emeritus, was among 16 retiring Vanderbilt faculty members honored during Commencement May 13.
Tricia Carswell, Associate Dean of Development and Alumni Relations, has stepped down to become Executive Director of Principal Gifts at her alma mater, Furman University.
Jon Lehman, Associate Dean of Students, has stepped down to become CEO of PAX Scientific, an engineering research and product design firm, but will continue to teach at Owen.
Ron Masulis, the Frank K. Houston Professor of Finance, who was away on a leave of absence to the University of New South Wales, has elected to join that university on a permanent basis as the Scientia Professor of Finance.
Mike Shor, Assistant Professor of Management, has accepted an opportunity to become Assistant Professor of Economics at the University of Connecticut, where his wife is also a faculty member.
For the past 24 years, the Financial Markets Research Center (FMRC) at the Owen School has hosted a spring research conference designed to facilitate discussion between academic researchers and business practitioners. Starting with the 1987 Wall Street crash, many of the best minds in finance have assembled at the annual event to analyze topics ranging from globalization to securitization.
This year was no exception. Brett Sweet, Vice Chancellor and Chief Financial Officer at Vanderbilt, chaired presentations on regulating risky banks, while Margaret Blair, the Milton R. Underwood Chair in Free Enterprise at Vanderbilt Law School, led a session about the federal rule-making process.
The primary focus of this year’s FMRC conference, held May 5–6, centered on implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Almost a year after the bill was signed, federal regulators continue to draft new rules overseeing hundreds of trillions of dollars’ worth of activity that touches everything from the credit-default swaps that played a role in the 2008 financial crisis to overhauling Fannie Mae and Freddie Mac. In fact, the task of implementing the law has proven so massive that regulators have pushed many of its deadlines back six months to Dec. 31, 2011.
Even as regulators finish their work, however, many questions remain (including from those within the government) about the law’s ultimate impact.
Mortgage Reform
Edward DeMarco talked about mortgage reform in his keynote speech at the FMRC conference.
Regarding home mortgages, Edward J. DeMarco, Acting Director of the Federal Housing Finance Agency (FHFA), said in his FMRC keynote speech that keeping Fannie and Freddie in an indefinite state of conservatorship—which has stretched on for more than three years—poses risks to an already fragile sector. Total taxpayer support of the companies could climb to $363 billion by 2013, according to FHFA estimates, and so far none of the reform proposals put forth by Congress and the White House have gained much political traction.
“The only thing Congress can agree on is not renewing their original charters,” he said.
Whatever plan does finally emerge for Fannie and Freddie, DeMarco indicated that there are at least three elements that any framework must include:
Uniform mortgage standards: From collecting borrower data to developing guidelines for home appraisals, he said the industry needs consistency and transparency throughout the life of a loan. Without these elements, the world of private capital won’t be able to price and evaluate risk correctly.
Diversity of product offerings: Lenders shouldn’t lock themselves into offering only traditional 30-year fixed-rate mortgages just because data standardization is needed. “This is a big country with lots of people in many different situations,” he said. “The mortgage market of the future really needs to be not just liquid and stable, but it needs to have an appropriate diversity of offerings.”
Clarity about the role of the taxpayer: To properly calibrate how risk is assigned, priced and managed, DeMarco said it’s imperative that investors fully understand the role of the taxpayer in any future mortgage finance system.
Derivatives Oversight
There’s a climactic scene in Michael Lewis’ bestselling book The Big Short in which Dr. Michael Burry, the neurologist-turned-investor, finally sees his $1.9 billion bet against subprime mortgages start to pay off—that is, until he contacts his counterparties and tries to collect.
Under the Dodd-Frank Act, federal regulators drafted new rules overseeing trillions of dollars’ worth of financial activity in the U.S.
As it happened, the very banks from which Burry purchased the products that, in theory, should have been making him rich were also the same institutions responsible for pricing his investments.
“It was determined by Goldman Sachs and Bank of America and Morgan Stanley, who decided each day whether Mike Burry’s credit-default swaps had made or lost money,” Lewis wrote.
Under the Dodd-Frank Act, many of those kinds of privately traded derivatives—worth as much as $600 trillion—will now be transparently priced and exchanged through a central clearinghouse. In addition, the Securities and Exchange Commission (SEC) will split oversight of these financial instruments with the Commodity Futures Trading Commission (CFTC).
Joanne Moffic-Silver, Executive Vice President and General Counsel for the Chicago Board of Options Exchange, told FRMC conference participants that her company is interested to see how the two federal overseers handle these new regulations.
“One question with the Dodd-Frank Act is: Will having two agencies split jurisdiction over functionally equivalent products work?” Moffic-Silver said. “Ideally, and this is my personal opinion, there should be little or no difference between the SEC and CFTC on swaps rules.”
As written in the new law, the SEC will handle swaps that are backed by securities like a single or narrow group of stocks; the CFTC will manage the rest, including 22 listed categories that include interest-rate, credit-default and currency swaps.
But Moffic-Silver said Dodd-Frank includes a number of possible exceptions that would exclude various swaps from being traded through a clearinghouse. In addition, the new law allows for the creation of a new “Swap Execution Facility” (SEF) that would be an alternative to listing on an exchange. Current proposals from both the CFTC and SEC differ on some of the specifics of how these SEFs would operate, Moffic-Silver pointed out.
“The rule-making process has been interesting. The SEC and CFTC do talk, they do meet, and they have a current memorandum of understanding where they are supposed to coordinate regulation of similar products,” Moffic-Silver said. “But the proposals have differed in some very important areas.”
‘Bail-ins’ instead of Bailouts
On Sept. 15, 2008, the world awoke to what Andrew Ross Sorkin, writing in The New York Times, called “one of the most dramatic days in Wall Street’s history.”
The storied brokerage firm Merrill Lynch was sold for $50 billion, just half of what it had been worth the previous year; and after failing to find a buyer, Lehman Brothers filed the largest bankruptcy on record, culminating in a painful $150 billion liquidation.
“When an airline goes out of business, air traffic control doesn’t go haywire. When a phone company goes down, we can still make phone calls. But when banks go down, it’s different.”
—Wilson Ervin
After those catastrophic events, Congress approved a $700 billion bailout several weeks later to help banks unload their “toxic” mortgage-related assets to prevent further shocks. Now, instead of once again using taxpayer money to help prevent a contagion risk that could bring down the banking world, there’s discussion about designing a “bail-in” mechanism.
Wilson Ervin, Managing Director at Credit Suisse, explained in a presentation at the FMRC conference that a “bail-in” would give regulatory officials the authority to impose a resolution designed like a prepackaged bankruptcy. “Think of a Chapter 11 bankruptcy on steroids,” he said.
“When an airline goes out of business, air traffic control doesn’t go haywire. When a phone company goes down, we can still make phone calls,” Ervin said. “But when banks go down, it’s different.”
Using the case of Lehman Brothers as an example, Ervin said by writing down assets and converting a portion of the debt to new equity, the bank could have preserved a capital base of more than $40 million, giving it some hope to raise additional investment from other financial services firms.
“The process would not be pretty, but overall investors should be relieved by the result,” Ervin wrote in an Economist essay he co-authored on the subject. “In [the Lehman] example the bail-in would have saved them over $100 billion in aggregate, and everybody—other than short-sellers in Lehman—would have been better off than today.”
New Vanderbilt Research
In addition to the speakers from government and private industry, several members of the Owen faculty presented new research, including Bob Whaley, the Valere Blair Potter Professor of Management, who discussed his collaboration with Jacob Sagi, the Vanderbilt Financial Markets Research Center Associate Professor of Finance, in launching NASDAQ’s Alpha Indexes. Also Nick Bollen, the E. Bronson Ingram Professor of Finance, shared results from a recent paper investigating hedge fund investment strategies, while Hans Stoll, the Anne Marie and Thomas B. Walker Jr. Professor of Finance and Director of the FMRC, presented new research with Thomas Ho, the FMRC Research Professor of Finance, examining the interaction between financial markets and regulations.
hen looking at most world maps, we take for granted our points of reference. North is up, south is down, and the U.S. is in the top left corner, just as it was when we first learned geography in grade school. Not everyone, though, subscribes to this point of view.
For decades, a group of trailblazing mapmakers has tried changing the world as we know it by changing how we see it. Their so-called reversed maps depict what seems like an upside-down world, where countries in the Southern Hemisphere have supplanted their neighbors to the north. The underlying message is that the perch from which we view the world is an arbitrary one. North is still north, of course, but that doesn’t necessarily mean that it should be at the top of the map. Nor should countries at the top be considered “above” everyone else—either literally or figuratively.
After graduating from college, I learned this firsthand, but without the aid of a reversed map. Torn over my job prospects (or lack thereof), I did what many 22-year-olds with wanderlust do: pick a place on the globe and go. Joined by a couple of friends, I set out for Chile, a country I knew very little about, with the intention of staying a year. My thought was that I would teach English to pay the bills and travel around South America at every opportunity, all while brushing up on my Spanish.
I ended up doing all of these things, but the experience as a whole left a much deeper impression on me than I ever could have imagined. During the course of the year, I made lifelong friends and gained a lasting appreciation for the culture. I also came to realize that my preconceived notions of what it means to be American were limited at best. In truth, our New World neighbors have rightful claim to that name as well, for in spite of our differences, we share a corner of the world with a common pioneering spirit.
Of all the discoveries I made that year abroad, I probably learned the most about myself. It’s ironic that I had to travel halfway around the globe to get to know the person in the mirror better, but that’s exactly what happened. Finding a new vantage point from which to view the world afforded me a much better understanding of my place in it.
I imagine the inaugural class of the new Americas MBA for Executives program, which is discussed in this issue’s cover story, will come to a similar realization. One of the program’s main selling points is the exposure to business practices in Brazil, Mexico and Canada, but the unspoken value is the personal journey that will accompany those experiences. By immersing themselves in those cultures, the students will be letting go of the familiar and looking at the world—and themselves—with a whole new perspective.
In other words, they’ll be doing those trailblazing mapmakers proud. vb
When looking at most world maps, we take for granted our points of reference. North is up, south is down, and the U.S. is in the top left corner, just as it was when we first learned geography in grade school. Not everyone, though, subscribes to this point of view.
For decades, a group of trailblazing mapmakers has tried changing the world as we know it by changing how we see it. Their so-called reversed maps depict what seems like an upside-down world, where countries in the Southern Hemisphere have supplanted their neighbors to the north. The underlying message is that the perch from which we view the world is an arbitrary one. North is still north, of course, but that doesn’t necessarily mean that it should be at the top of the map. Nor should countries at the top be considered “above” everyone else—either literally or figuratively.
After graduating from college, I learned this firsthand, but without the aid of a reversed map. Torn over my job prospects (or lack thereof), I did what many 22-year-olds with wanderlust do: pick a place on the globe and go. Joined by a couple of friends, I set out for Chile, a country I knew very little about, with the intention of staying a year. My thought was that I would teach English to pay the bills and travel around South America at every opportunity, all while brushing up on my Spanish.
I ended up doing all of these things, but the experience as a whole left a much deeper impression on me than I ever could have imagined. During the course of the year, I made lifelong friends and gained a lasting appreciation for the culture. I also came to realize that my preconceived notions of what it means to be American were limited at best. In truth, our New World neighbors have rightful claim to that name as well, for in spite of our differences, we share a corner of the world with a common pioneering spirit.
Of all the discoveries I made that year abroad, I probably learned the most about myself. It’s ironic that I had to travel halfway around the globe to get to know the person in the mirror better, but that’s exactly what happened. Finding a new vantage point from which to view the world afforded me a much better understanding of my place in it.
I imagine the inaugural class of the new Americas MBA for Executives program, which is discussed in this issue’s cover story, will come to a similar realization. One of the program’s main selling points is the exposure to business practices in Brazil, Mexico and Canada, but the unspoken value is the personal journey that will accompany those experiences. By immersing themselves in those cultures, the students will be letting go of the familiar and looking at the world—and themselves—with a whole new perspective.
In other words, they’ll be doing those trailblazing mapmakers proud.
The Vanderbilt Health Care Conference and Career Fair hosted more than 500 participants and 35 companies at a one-day session in Nashville this past fall. It was the fourth year for the student-organized conference, which is designed for anyone interested in the intersection of business and health care.
Generation Y, the first group to come of age in the Internet era, is all grown up and ready to launch the next wave of multibillion-dollar tech companies. And investors are ready to help them do it.
The trading volume of stock options has more than quintupled in the past decade, as banks, hedge funds and other traders have flocked to the investments. But retail options investors may be getting left out in the cold, unknowingly giving up as much as $1.9 billion in lost profits during that same time frame, according to new research from Kate Barraclough, Lecturer of Finance and Director of the Master of Finance program, and Bob Whaley, the Valere Blair Potter Professor of Finance and Co-director of the Financial Markets Research Center.
Distinctive as it is, the branding explains only part of Yazoo’s growing popularity. From the outset Hall knew that success hinged not only on the quality of his beer, for which he turned to the American Brewer’s Guild for a craft-brewing course, but also on the quality of his business plan. For the latter he enrolled in the Vanderbilt Executive MBA program, which he says gave him a strong foundation in strategy and operations, as well as a better understanding of what it takes to be an entrepreneur.
When looking at most world maps, we take for granted our points of reference. North is up, south is down, and the U.S. is in the top left corner, just as it was when we first learned geography in grade school. Not everyone, though, subscribes to this point of view.