Overview
This course takes a new and holistic view of the finance industry. It addresses some searching, real-world questions about what the finance industry can and should do, and why it sometimes fails.
Lectures include appearances by eminent guest speakers, including senior finance practitioners.
The course will be of particular interest to those who aim for a senior management position in the future, or who wish to understand the role the finance industry can play in solving some of the most pressing global issues.
The starting point of the course is to note that a modern economy simply cannot work without a successful financial system, and the financial system has an enormous influence on every aspect of business management. We discuss its “purpose”, and how this affects both providers and users of finance. That in turn can provide a foundation for understanding its role in answering the many issues facing the world in the 21st century: climate breakdown, poverty, and inequality.
We will also address evidence that suggests that finance is inefficient and overly focused on short-term profit, failing to serve the outside world, and sometimes misusing professional tools and techniques — including those routinely taught in finance courses.
Whom will the course benefit
Anyone who wishes to pursue a career as a business decision-maker needs to understand the financial system: what makes it function well, what creates failure, and how it will affect the organisation you work for and the world in which you live. Yet perhaps surprisingly these topics are often missing from business school curricula. This course aims to fill the gap.
The course will be of particular interest to those who aspire to a career that involves a wider world view – and will be of particular interest to those who might wish to challenge convention, develop critical thinking skills, and respond constructively to the considerable criticism the industry currently faces.
The course is taught by David Pitt-Watson, an experienced and pioneering finance practitioner and formerly Pembroke Visiting Professor at the Cambridge Judge Business School, and Dr Ellen Quigley, Principal Research Associate and Special Adviser to the Chief Financial Officer (Responsible Investment) at the University of Cambridge. Both are actively involved in the field of responsible investment as practitioners
The course includes senior guest speakers – senior economists, investors, writers, advocates, and practitioners. Last year we welcomed Andy Haldane, former chief economist at the Bank of England; Anne Simpson, a pioneer in the field of responsible investment; Roger Ferguson, former head of the $1 trillion pension fund, TIAA CREF, and Vice-Chair of the Federal Reserve; and Pedro Guazo, head of the UN Joint Staff Pension Fund.
Sharing pedagogical material
For those teaching (or wishing to teach) similar courses at other institutions, course material is available from David Pitt-Watson (david@pitt-watson.com) or Dr Ellen Quigley (ellen.quigley@gmail.com).
David Pitt-Watson
Fellow (Finance)
Ellen Quigley
Advisor
Learning objectives/outcomes
By the end of the course students should have:
- an understanding of the purpose of the industry to which many will devote their careers
- new perspectives on how the financial system works in practice
- ultimately the ability to reflect on how the work they do in the future will add value to the financial system, including looking at how the financial system contributes to or helps to address major global challenges
Areas covered on the course
By the conclusion of this session students should understand, and feel comfortable to debate, the key purposes of the finance industry – both those things it does that are important, and those things for which it can be criticised for not being ‘socially useful’.
We look at current research suggesting that the finance industry may not fulfil its purpose well. We examine the work of Thomas Philippon and Guillaume Bazot on the long-term productivity of the finance industry. They both suggest that there has been little increase in efficiency over more than 100 years.
In this class we explore how, as part of its asset management function, finance plays a pivotal role in corporate governance, which in turn influences the entire economic system. The class will reflect upon the regulations, institutions, governance, and market mechanisms through which the finance industry affects the rest of the economic system, and in particular its appropriate role in addressing climate and social issues.
In this session we consider how the techniques learned in studying finance can best be used in a well-functioning financial system. The aim is to help students reflect upon, challenge, develop varying perspectives on, and make practical the insights they have learned throughout their studies.
The class will reflect on what we have learned. How can the perspectives we have studied help achieve our goals? For some these may be career goals: getting a job that offers long-term progression. For others this may be about impact: how can they gain insight, and even influence the way the financial system works?
Stephen Davis, Jon Lukomnik and David Pitt-Watson (2016) What They Do with Your Money: How the Financial System Fails Us and How to Fix It. Yale University Press.
Ellen Quigley, “Universal Ownership in Practice: A Practical Investment Framework for Asset Owners”