In a decade that started under the shadow of global recession, we’ve contributed to new economic thinking, new business priorities and met the demand for greater support for innovation and entrepreneurship, in ways you can read about here. Where once we met Britain’s needs, we now teach the world and our aspirations haven’t stopped.
We're excited about what we've built at London Business School. The world needs more leaders with global perspective who can generate innovative solutions to help solve our increasingly complex problems. We can point to the impact we've had on business, policy and people's lives. And even better, we feel like we're only at the start. We're beginning to see the powerful connections of our global community of alumni and academics coming together to improve the future of our world. So here's to the next 50 years...
Ioannis Ioannou, Assistant Professor of Strategy and Entrepreneurship (pictured)
2010: Greece debt crisis.
2011: Arab Spring.
2011: Global population reaches 7 billion.
2011: Occupy Wall Street demonstration begins.
2011: The FT ranks the School’s Masters in Finance post-experience number one for next four years; The Deloitte Institute of Innovation and Entrepreneurship opens.
2012: London hosts the summer Olympics.
2012: Only 8% of London Business School’s income comes from government funds.
2012: The Diamond Jubilee of Queen Elizabeth II.
2012: The School leases Old Marylebone Town Hall for development, and launches its Global Business Experiences for MBA students.
2013: There are 400 MBA students, 6,000 Executive Education participants, and over 35,000 alumni.
2014: Lloyds Scholars launches 16 London Business School MBA scholarships for women.
2014: London Business School and Fudan University launch the Global Masters in Management.
2014: Most telephone calls are made via the Internet now.
2014: Virgin Galactic begins offering private suborbital spaceflights.
When Tata’s quality management team created the Innometer, Professor Julian Birkinshaw was delighted. “They gave my systems a brand,” he says.
Based on Birkinshaw’s work, the giant Indian conglomerate created a thermometer-like image that showed which parts of the company were good at innovation and where more work was needed. It encouraged Tata’s companies to compete with each other to be more innovative and to benchmark themselves against external companies.
Best of all it sparked a new idea for distributing electricity in a country where power can often be in short supply. Part of the Tata group then known as North Delhi Power Limited (NDPL) thought about asking the water utility Delhi Jal Board to receive its power in off-peak periods to reduce the overall demand in peak periods. “This is a first of its kind initiative in India, where the electricity and water utilities have joined hands for a peak-shifting project,” NDPL’s managing director Sunil Wadhwa said on Tata’s website.
Other Tata companies such as Tata Capital also say they’ve benefited with more employees contributing ideas. The innovation drive was sparked by R Gopalakrishnan, director of Tata Sons, who was on the look out for the latest thinking. He met Birkinshaw and suggested trying out a programme for one of the group’s companies, Tata Chemicals. In 2010 Birkinshaw went to Mumbai and spent a couple of days with the company’s managers describing various ways of driving and evaluating innovation, before running further events for the group. Many of the ideas came from his 2007 Harvard Business Review article Innovation Value Chain written with Morten Hansen, Professor of Entrepreneurship at Insead, based on research with over 30 multinationals.
“Being radically innovative as a big company is extremely hard,” says Birkinshaw. “There’s an assumption that companies either can’t change or can only change through heavily structured, top-down programmes. We say there’s a third way – a bottom-up process.”
This bottom-up approach has always been at the heart of Birkinshaw’s work. For his doctoral thesis in Canada in 1995 he looked at subsidiaries of American companies that were fighting for survival. The American companies had set them up to avoid tariff barriers by manufacturing in Canada to sell in Canada. But when the North America Free Trade Agreement took effect in 1989 and got rid of the tariffs, the Americans no longer needed their local affiliate; they could manufacture the goods cheaper elsewhere and then sell them in Canada. So the Canadian affiliates had to be smart enough to come up with something different they could do, or be closed down. And only about two out of ten succeeded.
In a similar way, multinationals also have to think about how to reinvent themselves. Big corporate collapses usually stem from a failure to innovate - whether it’s Nokia at the top of the mobile phone market, Lehman Brothers leading the world of investment banks, or Kodak dominating the photographic market, no company can afford to stand still.
“Companies get incredibly stuck with an existing set of processes,” says Birkinshaw. “Over the years they become internally focused, incapable of allowing new things to come out. So I identify what the most critical “blockers” are – like heavily siloed divisions, short-termism, and risk-averse behaviour which stops them taking even well-intentioned risks such as launching new products.”
And this is where Birkinshaw’s idea of management experimentation comes in. He’s found that when he works with executives in management development they’ll often say they can see something’s not working but because they’re not the chief executive, they don’t know how to change it. The answer he says is to experiment with changing a part of the system.
Since 2006 Birkinshaw has worked with Roche to set up some 80 different experiments across the company. One example is crowd-sourcing R&D problems. One division makes diagnostic instruments – the machines that analyse medical samples – and it was facing technical problems in its development labs. So it used the Innocentive platform to open the problem up to tens of thousands of experts outside the company, as well as its thousands of R&D employees within the company. In that case it got better ideas externally. When it tested other problems it found that certain types of problems were better solved externally and others internally.
“We’ve helped companies think more creatively about how they can change the way they work,” says Birkinshaw who’s other clients include Intel, UBS and Rio Tinto. “One guiding theme is helping large companies to figure out how they can be large and small at the same time. And part of that is that innovation can be both a bottom-up and top-down activity.”
Birkinshaw has taken his ideas into companies where executives are really struggling in the face of challenges and trends in the world, and knows that everyone wants some good news about companies that do manage to change.
One of his favourite examples is Amazon which he says has been incredibly agile in adjusting to trends. When the company created the kindle people thought it was crazy for cannibalising its core business of books. But the gamble has paid off, as today the kindle isn’t just a book reader but a portal through which Amazon sells other things like TV and film. “It was obvious that digitisation was happening,” says Birkinshaw, “and Amazon was smart enough to say rather than let someone create this business, we want to be on the leading edge of it.”
Julian Birkinshaw is the London Business School Term Chaired Professor of Strategy and Entrepreneurship.
When Andrew Scott addressed the G7 deputy finance ministers at a castle near Rome in June 2010, he was in a minority. The ministers were feeling the pressure of their rising national debts and were keen to do something about it. But Scott wanted them to hold back.
Based on his research, Scott told them they should expect debt to be high for the next few decades. He said history showed that was the right way to deal with a financial crisis and there were ways to cope with such long, large debt swings. They should let debt stabilise the economy, rather than using the economy to stabilise debt.
“It didn’t chime with the mood of the time,” says Scott. “The first response by governments to the financial crisis had been to cut interest rates to zero and let fiscal deficits get large. So you suddenly saw government debt jump in a very pronounced way and they were feeling worried about that.
“I was saying that debt is a means to an end as opposed to something you should target. And I remember being told by a politician on another occasion, that no, politically debt is an end, people care about debt, so we have to bring it down.”
Despite his feelings about that meeting, and similar meetings with the UK Treasury and European Central Bank, things have so far been panning out in Scott’s direction. Debt has carried on rising and it looks like that will continue. The US government has continued to borrow. The UK government has been rather less strong on its austerity measures than it stated it would be. And the debt figures remain high. The UK’s debt is currently more than US$1 trillion, about 88 per cent of GDP. The US’s debt is close to US$17 trillion, just over 100 per cent of its GDP.
It’s perhaps because those numbers sound so bad that debt is still a concern for many. But Scott’s not saying that governments should ignore debt, only that they don’t need to keep it below the 90 per cent of GDP suggested by prominent Harvard economist Kenneth Rogoff. And from UK history he knows that a couple of times government debt has reached 180 to 250 per cent of GDP and the government has just brought it down over the long term.
Scott’s confidence comes from debt research he started when he joined London Business School as a Professor of Economics in 1996. It followed a spell at the Bank of England studying business cycle fluctuations and monetary policy under the Bank’s then chief economist Mervyn King. At the time everyone was interested in monetary policy but Scott emerged more interested in fiscal policy. With co-author Albert Marcet at the Universitat Autònoma de Barcelona, he set out to answer two questions: first, is debt a problem? Second what’s the right type of debt for governments to have; what’s the right mixture of long run and short-term bonds?
Scott and his team had to first write the models and develop the methods to do the highly complex computations needed. In their first paper their data showed that in a crisis, debt shows bigger swings than other variables, not only for the period of the recession but also for decades afterwards. Their conclusion was that governments shouldn’t use tax and expenditure to balance things in the short run, it’s important for debt to take the strain for adjusting to the shock. Then governments can use taxes and spending over the long run to get back to balance.
Next they started looking at which types of bonds governments should offer to give them “fiscal insurance” and minimise risk. “The more we explored the area the more we found there’s no good data on government debt,” says Scott. “There’s no single series that tells you the market value of government debt, no simple record of the number of bonds of different types of maturity. You have to construct it yourself.”
Scott worked with Martin Ellison to put together a database of 125 years of UK government debt, with details of each bond the government has ever issued at each point in time.
His team has also analysed the way governments handle their debt in terms of the duration of bonds issued, when to buy debt back, and whether to pay coupons on bonds.
In the past, economists have ignored these realities of government debt handling, as it’s such a huge and difficult task to analyse – both theoretically and numerically. And Scott says that’s skewed ideas in the economic literature of how to manage debt. “So we’ve been trying to look at models to advise debt management and fiscal authorities as to how they should issue debt but also take into account certain features of the market,” he says. And their work has advised the UK Treasury’s agency, the Debt Management Office, which is responsible for managing public sector funds for the UK government.
In his 2014 paper with Elisa Faraglia, Albert Marcet and Rigas Oikonomou, the nicely titled Government Debt Management: The Long and Short of it, Scott set out a breakthrough computational method to solve portfolio models with many assets and different maturities. The model lets you see both fiscal policy and debt management effects at the same time. Previously governments would set a fiscal deficit and tell debt managers to go and deliver it. The model also shows that governments need to issue both long and short-term debt because cash flow matters. A government might want to issue ten-year bonds but in ten years’ time they would have a big refinancing issue, so it’s important to spread it out.
In 2014 Scott finds his work is still at the centre of the debate about how to revive the economy. “In some senses it’s back to the Keynesians vs non-Keynesians,” he says. “And of course the Great Depression was in part caused by central bankers and fiscal authorities believing that fiscal prudence meant banks should fail and governments shouldn’t incur debt, and that was the way you made the economy better.”
In the mean time debt is high and Scott’s fine with that. And he’ll be watching closely to see whether the austerity measures planned for the next five to ten years are actually implemented.
Andrew Scott is Professor of Economics and Deputy Dean (Programmes) at London Business School
Ian Zilberkweit never thought of himself as the entrepreneurial type. But when he lost his job as an investment banker he felt like he needed a change. He didn’t want to commit to another job only to lose it. He wanted his own business. The problem was how to think about products and markets, margins and competition, and how to build an enterprise that could last. He took an MBA at London Business School and, for a would-be entrepreneur, he says, “it was an eye-opener”.
Zilberkweit went on to create LPQ Russia, a retail and wholesale food business that today has annual sales of over £30 million. He’s just one of a string of alumni who’ve benefited from the School’s emphasis on teaching real-world entrepreneurship – which in 2011 took a new form with the creation of the Deloitte Institute as the School’s centre of research on the practice of innovation and entrepreneurship.
Yet the story of teaching entrepreneurship at the School goes back a long way. In 1976 the late Michael Beesley set up the Institute of Small Business Management at the School as a centre for research and teaching in entrepreneurial management, which in turn led to the New Enterprise Programme designed to teach the art of business start-ups.
Today the teaching of entrepreneurship is about opportunities at any scale, not just small businesses. But in the early days, the ambitions of young entrepreneurs were usually focused on the idea of the small company. Tony Wheeler who founded the Lonely Planet publishing company after graduating with an MBA in 1972 says that back in the 1970s it seemed very unlikely that the big companies of the day could be challenged by start-ups. “The idea that someone could come along and displace a company like IBM, and cut the ground out from underneath them, was well nigh unbelievable,” he says. “Of course now we don’t believe there is anything that can’t be undercut.”
Teaching entrepreneurship is still something that many schools shy away from: there’s an assumption that the entrepreneurial gift is more to do with personality type than knowledge, and probably can’t be taught. But that’s quite wrong, according to John Mullins who teaches entrepreneurship at the School. “There’s no such thing as an entrepreneurial personality,” says Mullins.
“They may be outgoing, they may be introverted. For example, Michael Dell is an introvert. Bill Gates is an extrovert.”
What does unite successful entrepreneurs, adds Mullins, is a capacity for very hard work. “It also helps if you’re comfortable with ambiguity, not knowing what’s coming next – because ambiguity is one thing that you’re going to get by the boatload.”
It also helps to have an ambition to create change. Richard Downs graduated with an MBA in 1998, the same year he had the idea for the ski chalet and holiday company that became Iglu.com. “I wanted to change the industry,” he says. “That desire for change is an especially important element in our story and for entrepreneurs generally.”
There’s been a great increase in student interest in entrepreneurship since the dotcom boom at the start of the century, when it suddenly became apparent that new and innovative businesses had the ability to attract investment funding. The global financial crisis helped maintain that interest, because it made it clear, if it wasn’t clear already, that traditional corporate employment was no longer the safe bet it once seemed to be.
The growth of London as a financial and business centre has also been part of the story of entrepreneurship teaching at LBS says John Bates, who has taught entrepreneurship at the school since 1984. “There are other schools with strong programmes, but London is special,” says Bates. “The London ecosystem is good for entrepreneurs – there is a critical mass of knowledge, of financial know-how, and legal expertise.”
That expertise is necessary to the systematic assessment of risk, something that John Bates believes is an essential part of the entrepreneurial process. “Entrepreneurs aren’t necessarily risk-takers,” he says. “But understanding risk is a key part of their process. People in large organizations often have no concept of risk – which is why they end up taking a lot of wild risks, because they don’t know they are doing it. What we do is help people understand risks.”
Entrepreneurship is taught in elective courses within the MBA programme, with around 80% of students now taking at least one course. “The typical student isn’t yet an entrepreneur, but someone who’s thinking this is something they may want to do,” says Mullins. “They’re figuring out if this is their path – and the teaching is all about helping them understand the challenges, and giving them the tools they need to succeed.”
And the record of success?
“We’ve helped people control their own destinies,” says Mullins. “And we’ve helped give the world some wonderful new companies – the kind of enterprises that are the main creators of jobs in today’s economy.”
John Mullins is Associate Professor of Management Practice in Marketing and Entrepreneurship at London Business School
John Bates (pictured above) is a Fellow in Strategy and Entrepreneurship at London Business School
One of the biggest surprises for Professor Lynda Gratton after the publication of her book The Shift was that it was big in Japan. With no prior publicity it became a non-fiction bestseller in the country, totalling some 100,000 copies, and was named business book of 2013 by Japan’s Biz-tai Committee. The book talks about the universal trends that are changing our world – technology, globalisation, demographic patterns, limited resources, social forces - and what they mean for people in the way they work and live. And while the message applies to all countries there was something in it that struck a particular chord in a nation with a rapidly aging population, a shrinking workforce and some outdated social practices.
A prominent Japanese blogger called Chikirin started a social media flurry when she blogged about how much she liked the book and launched a discussion session on Twitter. People then got together for numerous book reading events in Tokyo, Nagoya and other cities, and the word spread.
“What it shows you as an academic is that you can throw ideas out but it’s very difficult to know why some ideas ignite at a particular point in time,” says Gratton who’s received awards for her work around the world, from the Center for Creative Leadership in the US to a lifetime achievement award from HR Magazine in the UK. “I said something that touched a fundamental concern that Japanese people had, especially young Japanese people, which was about: ‘How am I going to make this work? What do I have to do to be part of this global world?’”
The Shift also took off in Spain at a time of high unemployment. Gratton visited the country to give media interviews around the book and in a speech in Madrid she talked about the type of skills that are valuable, how to develop them, the role of government policy, and what corporations can do to bridge the gap between the workers they want and the workers they’re getting from the education system. “Ideas hit home because you’ve talked about something people are worried about and it helps them deal with it,” she adds.
The Shift came out of Gratton’s research with her Future of Work Consortium. Set up in 2009 this group brings together trainers, human resources experts and interested parties from some 35 companies from different sectors and countries for collaborative sessions on the future of work. Participants sign up for 12 months and the Consortium chooses themes for discussion. This year’s themes are the 100-year-life and how living longer changes choices; advances in collaborative working; and new sources of talent.
There are face-to-face sessions and then the theme is opened up to a wider three-day webjam which can have 1,000 people coming together and making thousands of comments online. The Consortium then puts together a thematic report integrating insights from the jam with case studies, academic articles and research.
Among the diverse participants are Nomura, Sabic, PepsiCo, Infosys, France Telecom and the Singapore Ministry of Manpower. Vivian Leinster of BT Global Services says her company aims to use the insights across every bit of its practice. While Anshoo Kapoor of Tata Consultancy Services says it’s helped in her company’s strategy and human resources planning and “futureproofed” the organisation.
The Consortium’s work sparked another book, The Key, which was published in 2014 and concentrates on what these trends mean for companies. One issue is collaborative working. “We always ask companies what they want us to research and they keep saying collaboration,” says Gratton. “It’s about how you build an organisation that encourages people to share.”
And if there’s a theme to Gratton’s work, it’s collaboration, which is also born out in her methodology. She’s always been interested in what companies can learn from each other and from academics. She had the idea for the School’s Global Business Consortium that launched in 1995 and is still running. Six different companies send six of their executives on the programme to share ideas on global business issues. She’s launched various consortia over the years of which the Future of Work Consortium is the most advanced.
All of which seems to have tapped into the mood of the times. “I think companies really understand now that they’ve got to look outside for what’s happening,” says Gratton, “because the world’s changing, and it’s changing fast.”
Lynda Gratton is Professor of Management Practice at London Business School and joined the School in 1989.
On the day his research made the front page of the Financial Times in September 2013, Ralph Koijen was contacted by the insurance regulators of several countries. It was exactly the kind of response an academic wants. “It’s great to see that our research has practical relevance and can impact economic policy and the debate on insurance regulation,” says Koijen who’d just joined London Business School as Professor of Finance a few months before.
The work of Koijen and his co-author Motohiro Yogo, a monetary advisor at the Minneapolis Fed, lifted the lid on the rise of shadow insurance in the United States. These reinsurance transactions to less-regulated and affiliated insurance companies, take liabilities off the balance sheets of major insurance companies that sell policies directly to consumers. Although shadow insurance isn’t illegal, it’s not very widely known about and Koijen and Yogo’s research said it increased from $11 billion in 2002 to $364 billion in 2012. Their research also shows that insurance companies are significantly riskier as a result of this shadow insurance, which is not reflected in credit ratings.
The authors argue for more transparency. They say if there’s no risk in the way life insurance companies are using their affiliates as reinsurers, then they should at least show the outside world what they’re doing so that regulators and others can assess the risks properly. In terms of transparency, Europe is even worse than the US as no figures are publicly available to assess the size of the shadow insurance sector.
Until 15 years ago the life insurance sector was considered to be very safe but at the heart of current concerns is a battle between regulators and insurance companies over the size of the capital reserves life insurers should have. Back in 2000, American state regulators adopted the National Association of Insurance Commissioners’ recommendation that insurers’ reserve requirements weren’t conservative enough and needed to be increased, which is known as regulation XXX/AXXX. The industry thought the regulation was too tough and looked for ways of dealing with it.
One idea they had was to adopt a different approach to reinsurance. In its traditional form, reinsurance is accepted as a useful way of spreading risk. So that if an earthquake hits Japan for example, then because Japanese insurance companies have reinsured in other countries those other countries would be able to pay out too and Japan’s insurers wouldn’t be totally crippled. But America’s life insurers had the idea of setting up affiliates of their own company and reinsuring with them as reinsurance companies aren’t subject to regulation XXX/AXXX. Some 30 US states allowed them to do so, led by South Carolina and Vermont. The problem is that this type of reinsurance doesn’t spread the risk; it just keeps it in the same group but off the balance sheet. Moreover, reinsurance companies have to provide much less transparency about their investments and balance sheets than insurance companies who sell directly to consumers.
Koijen’s research with Yogo is the first to show the real scale of what’s going on. It “maps out the plumbing” of the US reinsurance sector to track where the money goes, how large it is, what the incentives are, why people are doing it, and what would happen if it wasn’t allowed. They’ve found that today for every dollar of life insurance sold in the US, 25 cents goes to these reinsurance companies. And the figure is growing.
“If you want to have relevance and impact with your research then this is a great area as there’s very little on it, in particular in comparison to the work on banking,” says Koijen. “As academics, we can add value by studying the data through the lens of economic theory and by quantifying the impact of changes in regulation on the growth and stability of the insurance sector.”
Koijen and Yogo have discussed their work with regulators in the US and the UK. In April 2014 they presented their findings to a meeting of G20 insurance regulators. In the meantime they’d love to get their hands on European data to examine what’s happening in shadow insurance there.
Ralph Koijen is Professor of Finance at London Business School and an Academic Director of the School’s Institute of Asset Management.
When Hélène Rey stepped up to present her paper at the Jackson Hole symposium in August 2013 she knew this was the most influential gathering of financial policymakers and central bankers in the world. The chair of her session was Janet Yellen, soon to be Chair of the Fed. Christine Lagarde, managing director of the International Monetary Fund, was at the meeting, along with the governors of the banks of Japan and Mexico amongst others.
It was good timing for her research on the spillover effects of US monetary policy on emerging markets. America was gradually reducing its bond-buying programme that had been designed to stimulate economic growth and the emerging markets were feeling the effects of the policy change. Her message was that international capital flows have increased hugely in scale since the 1990s, they can cause havoc when they suddenly disappear from a country because of some policy change, and they have to be managed to avoid market instability. She also offered a range of ways policymakers could take action through macroprudential policy or capital controls.
The audience was receptive. The first question came from the eminent economist Stan Fischer, President Obama’s pick to be deputy chair of the Fed, who wanted detail on whether exchange rates can insulate countries from shock. Rey’s paper was widely reported by the press and she’s received plenty of feedback. “I’ve had emails from people, I meet people and I see them at conferences and I know that people at most central banks, the IMF, international organisations, have all read the paper and are discussing it. In the markets there are lots of hedge fund managers, asset managers who’re talking about this as well.”
This is the impact that Rey wants. As an academic she feels her role is to contribute to the public debate. “It may lead to policy actions, it may not,” she says, “but policymakers need interaction with academics in a lot of areas as they don’t necessarily have the time to take a step back and figure out a few things. It’s not about telling them they should raise the rate by 25 basis points tomorrow, it’s about trying to explain how the world works a little, so when they make these decisions they make them with a little more information.”
Since her PhD in 1998, all Rey’s work has been about the international monetary system. This paper on monetary policy follows on from research she did at Princeton into the role of the US dollar in the international banking system. When most people were worrying about America’s trade deficit, Rey and co-author Pierre-Olivier Gourinchas said that it might not matter too much because America was doing very well in financial income. That financial success came from the old idea of America’s “exorbitant privilege” – because of the dollar’s position at the centre of global finance, America gets beneficial returns on its assets around the world.
What Rey and Gourinchas provided was a model of viewing a country’s financial position. They said that because of the huge increase in international finance, you can’t just look at a country’s imports and exports anymore, you also need to take into account its investments and debts. This work was also discussed at high levels by the Fed, the IMF and the financial community.
Rey’s won an array of economics prizes – in 2013 she was the first woman to win the Yrjo Jahnsson prize and in 2006 she won the Bernacer Prize for European economists. She’s advised the French government on economic policy and she’s currently on the board of the French banking and insurance regulator.
But most of all she wants to improve our knowledge of economic forces and prevent economic crises. “We don’t have a very good understanding of the various effects of monetary policy,” she says. “How monetary policy reacts with risk-taking in the financial sector. What a central bank should be doing as they have a lot of things to worry about – unemployment, inflation, but also financial stability.
“Can we have all the good aspects of what monetary policy can do without causing financial instability, credit bubbles, too much asset price inflation in some markets? So can we insulate countries from the bad aspects of too much liquidity or too little liquidity?
“And all that’s important - ultimately - for people.”
Hélène Rey is Professor of Economics at London Business School
Alex Edmans is one of the few finance professors to have appeared on the sports channel ESPN. His work weighs into the debate at the heart of finance about whether markets are efficient and only affected by fundamentals like profit, dividends and inflation, or whether they’re inefficient and affected by emotion and sentiment. But for ESPN what mattered was that it talked about…football.
As a keen sportsman and follower of Reading Football Club, Edmans was well aware of how emotional sport can make you. That was backed up by his research into medical and psychological literature, which showed evidence of increases in heart attacks and suicides after major sports defeats. So he set out to investigate the idea that sports results can have a large enough effect on emotions to have an effect on the stock market as well.
“You want to measure something that affects mood and sentiment but doesn’t affect fundamentals like profit and dividends,” says Edmans who joined London Business School in 2013. “A plane crash or an election affects emotions, but it also changes economic fundamentals. Sports results work because they affect the national mood but not the fundamentals.”
Edmans first tested his idea with World Cup football results studying 1,100 matches involving 39 countries from 1973 onwards. And with Diego Garcia and Oyvind Norli, he found that systematically when a team gets knocked out of the World Cup, that country’s markets fall significantly on the next day by at least 0.5 per cent more than they would have done given other events in the world economy. In the UK a 0.5 per cent fall is equivalent to wiping £10 billion off the stock market.
“You can never definitively prove something in social science, but with a lot of data you can get pretty close. This evidence is a strong indicator of the impact of emotion on markets,” says Edmans. His work only found a negative effect caused by defeats, usually elimination. The positive effect is harder to identify simply because there isn’t enough data – only a few teams win really big by winning the World Cup itself for example, and so there aren’t enough of these events to analyse.
In 2006 when the paper was launched, it had media coverage in 30 countries and stories in the Financial Times, Economist, Wall Street Journal and New York Times. In the 2014 World Cup Edmans was interviewed three times on CNN, as well as on the BBC and ITV. “I think the aim of a professor is the creation and dissemination of knowledge so I think the goal is to show that finance is interesting and to break the mystique a little bit,” says Edmans. “I used to be in investment banking so most of my topics happen to be applied.”
But Edmans’ work has also had huge academic pick up with more than 330 academic citations. And while his core work is in corporate governance, executive compensation and corporate social responsibility, Edmans is still interested in continuing to check out his football theory. In the 2014 World Cup one of the biggest shocks was Spain’s 5-1 defeat to the Netherlands, the next day the Spanish stock market fell by 1 per cent while the world market went up by 0.1 per cent. After Italy’s shock 1-0 defeat to Costa Rica, the Italian stock market fell by 1.5 per cent when the world market was flat. Out of the 39 losses by a country with a developed stock market, 26 were followed by the national market underperforming the world market.
But the biggest shock of the tournament was Brazil’s 7-1 defeat to Germany which needs some extra context to analyse. When the market reopened a day after the defeat it actually rose 1.8 per cent while the world market fell 0.4 per cent. It bucked the theory but Edmans has an explanation. He says that because the defeat was so bad investors thought it would increase the chances of socialist President Dilma Rousseff (who invested billions of dollars in football stadiums to host the World Cup that she had earlier promised to schools and hospitals) being voted out in favour of the more pro-business party – showing the influence of not just emotion but also cool political calculations in the stock markets.
Alex Edmans is Professor of Finance at London Business School.
In London Business School’s first MBA class starting in 1966 there was one woman among 35 men. Sheila Greenfield (formerly Cross), says that at the time she didn’t notice anything unusual about being the School’s first and only female student - but that 2.6 per cent representation wouldn’t stand up to much scrutiny today.
Since then 2,135 women have passed through the School’s doors to take their MBA, 24 per cent of the total MBA students, and 6,263 women have taken executive education programmes. In 2011 London Business School set a goal that 30 per cent of MBA students should be women, and it currently has seven different scholarship schemes for women, the most recent sponsored by Lloyds Banking Group. Many of the School’s alumnae say their business studies gave them the confidence to take on more senior roles and provided them with the knowledge and perspective to do the job. They also say they’re keen to help other women get on.
When 1993 Sloan fellow Carla Cico arrived in Brazil in 2001 to take up her position as CEO of Brasil Telecom, she brought a support team of three with her – all women. When she launched Brasil Telecom’s award-winning social responsibility programme, she handpicked a team of women from the firm who she dubbed “the girls”.
“I think there are jobs where women are more suitable than men and jobs where men are more suitable than women,” says Cico who’s featured in Forbes’ list of the world’s 100 most powerful women. “I work fantastically with women. I’ve always considered and promoted women, but I’ve never picked a woman over a man if I thought the man was better. You have to show your capability.”
While there are still more men at the top of companies Cico thinks that in ten years’ time it will be a different story, as the next generation of women comes through. In the meantime she’s keen to do more mentoring and will continue to introduce women she knows to boards that for too long have relied on the old boy network to recruit. And it’s those board roles that are now a focus for other London Business School alumni.
Elin Hurvenes finished her EMBA in 1995. She decided to return to her native Norway for the chance of a good life and a good career as she had the feeling that “in the UK women had babies and in Norway couples became parents”. The more family-oriented climate helped her pursue her career as a planning consultant. But in 2003 she spotted a unique opportunity.
That year the Norwegian government introduced a quota for 40 per cent female representation on boards of companies listed on the Oslo Stock Exchange and other major companies – if they didn’t comply they would be delisted or completely shut down. The hard-line approach was met with hostility in Norway, which at the time had 6 per cent female board membership. Arguments swirled that there weren’t enough suitable women, women didn’t have enough experience, they weren’t qualified and they weren’t interested in non-executive board roles. But it was the front page of one of the financial papers that gave Hurvenes her idea.
“Ten of our best known chairmen were saying that they were exasperated that they didn’t know where to find women for board roles. And I thought this is probably true,” says Hurvenes. “If they recruited board members from their friends and business associates then how would these men ever come across top-level women?”
Hurvenes realised she knew where to find these women even if the chairmen didn’t. And she had the idea of getting the chairmen and top women to meet face to face as a way of building the kind of trust and understanding needed for board work. She set up her first event creating a boardroom scenario where chairmen and female potential board candidates discuss a real business case. The feedback was so positive that she launched her own company, Professional Boards Forum, to do more of the same.
By 2008 Norway achieved its goal of 40 per cent women on boards and that year Hurvenes set up a branch in the UK with Jane Scott who fittingly enough she met on her EMBA course. She’s since launched in the Netherlands, Switzerland and Germany, which has its own quota of 30 per cent.
Hurvenes thinks things are getting better for women at the top. “There’s enough research now that shows diversity is good for business,” she says. “And even if you’ve never had a strong feeling of equality in your life, it clearly doesn’t make sense not to utilise the full talent pool.”
It was that same feeling that hit Rowena Ironside as, post Sloan programme, she switched from 25 years in technology to a portfolio career as an advisor, non-executive director and angel investor. She realised the female entrepreneurs she was considering investing in were meeting obstacles she’d never come across. “I didn’t become a feminist until my 50s,” she says. “When you look and see there are only a handful of women CEOs of the FTSE100 companies you realise it’s not just chance, there are other things going wrong.”
Ironside became chairman of the UK branch of the Australian invention, Women on Boards, which has a different approach to the problems women face getting on boards. First it aims to give information to women who want to join boards but have no idea how to go about it - and 1,200 women have attended its workshops in 18 months. Second, it counters the lack of transparency in board recruiting by providing a free online listing of board vacancies for everything from housing associations to charities to top companies.
“It’s all about giving women the insights to build their careers more successfully,” says Ironside who celebrates each time one of the organisation’s women gets onto a board. “They need to make their achievements known, understand how influence works in an organisation and work the networks. Having an MBA helps with all that because if nothing else it shows others you’re ambitious.”
That ambition showed for Sheila Greenfield too as she boldly set out to get her business degree in 1966, a time when there were few women role models. Recently retired, she feels she put her dreams of a truly high-flying career to the side in order to care for her three children. But she still went on to become vice-president of Management Science Associates in Pittsburgh, the company she joined straight from her course. And she still remembers her studying days with pride. “Business school was the most wonderful thing I could have done,” she says. “I was really lucky. I look back and I think it was a real milestone in my life and one of those turning points.”
The 2010s is the first full decade where the global population has been more urban than rural. By 2007 50% of the population lived in cities and urban areas. The world population is projected to peak at nine billion by 2050.
An office worker's productivity per hour is now 84% more than forty years ago. Technologies such as the mobile phone, email and business software mean that information can be accessed, recorded and shared quickly and efficiently.
Sourced from O2 Business and the Centre for Economic and Business Research (2013)
Tablets relieve headaches and can be taken on the move. We're not talking about painkillers. 37% of consumers switched from their PC to a tablet in 2012. And by 2017 60% of online consumers based in the US and Canada, and 42% in Europe, will own a tablet.
Sourced from The NPD Group (2013) and the Forrester Research ForecastView Trends (2013)
Smartphones are essential in the digital age. Today 90% of phones sold globally are smartphones. Models offer you clever computing and greater connectivity, but future models could feature folding batteries and solar powered screens.
Sourced from The Guardian (2013)
Professor Julian Birkinshaw, FacultyRead more"Speaking at the 2014 GLS event"
Anonymous, OtherRead more" Reunion of all 2002 – 2012 MBA Alumni"
Karl Naim, AlumniRead more
MBA2011"The depth, breadth, accessibility and pro activity of the Alumni network around the world is astonishing, and like good wine, gets..."
Sasha Pak, AlumniRead more
MBA2014"Thanks to our amazing classmates, we spent ten days discovering history, culture, cuisine and nightlife of Israel. The trek..."
Varun Dinodiya , AlumniRead more
MBA2011"Graduation Day...Class of MBA 2011...End of an Epic Experience...the Start of a new Journey...Friends for Life! Thank you London..."
Professor Julian Birkinshaw, Faculty"Speaking at the 2014 GLS event"
Anonymous, Other" Reunion of all 2002 – 2012 MBA Alumni"
Karl Naim, Alumni, MBA2011"The depth, breadth, accessibility and pro activity of the Alumni network around the world is astonishing, and like good wine, gets better year over year. May you be looking to start a business, require industry expertise, travel advice, or simply connect with fellow LBS alumni around the world, there will always be someone out there, whom you never met, that will lend a hand."
Sasha Pak, Alumni, MBA2014"Thanks to our amazing classmates, we spent ten days discovering history, culture, cuisine and nightlife of Israel. The trek started with an unforgettable dinner in Jerusalem's historical market quarter and finished with a very special guest talk by the ex-Prime Minister Ehud Barak..."
Varun Dinodiya , Alumni, MBA2011"Graduation Day...Class of MBA 2011...End of an Epic Experience...the Start of a new Journey...Friends for Life! Thank you London Business School!"
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