Market devices: opening up the underbelly of Wall Street at the Academy of Management
July 15, 2008
As the Academy of Management draws closer, I am readying myself for the annual event that sets research agendas, brings together old colleagues… and exhausts everybody. I’d like to draw attention to a new and timely symposium, “Market Devices: Understanding the Underbelly of Financial Markets” that Klaus Weber, Dan Gruber and myself are organizing.
To download the 15-page document, click on: Market devices symposium
Does finance belong to a meeting of management scholars? Looking back at the long twelve months that have elapsed since the last Academy, it is safe to make a bold statement: the most important economic developments of these past months are not simply organizational, but grounded in the financial markets.
Consider: back in August 2007, Bear Stearns’ failed hedge funds were going away peacefully. The CEOs of Citigroup, Merrill and UBS were all reigning over mountains of mortgage securities. And — more personally — two close friends of mine had just closed on a house in a city where they did not live “as an investment.” A lot has happened since.
The capital markets, in other words, appear to run the economy. What does that mean for management scholars? Minor adaptation, one could argue: continue existing work on embeddedness, bounded rationality, institutional isomorphism or the resource-based view… but focus on investment banks rather than large multinationals or technological startups.
That is not my view. Nor is it the view of established management scholars such as Bruce Kogut and Jerry Davis. In a provocative piece in the European Management Review, Kogut calls for new methods, new intellectual perspectives on Wall Street, specifically highlighting the work on performativity and the social studies of finance. In similarly thoughtful piece, Davis and Marquis claim that grappling with the financial markets – with the vast, brutal, blasting force of M&A, financialization or the rise of CFOs – calls a new research focus, with attention to mechanisms that have previously been ignored.
Given all this, Klaus, Dan and I decided to take action. We put together a symposium based on the premise of looking down: opening the lid of the capital markets, and examining its underbelly. The title is also design to reference an important book, Market Devices, published this year, on financial artifacts and technologies (the book is edited by Michel Callon, Yuval Millo and Fabian Muniesa). Formulae, metrics, rates and numbers form a confusing trellis that holds the secret to the capitalist troubles. And there is method to the madness. More often than not, the engine of financial formulae stops working for organizational reasons.
In other words, management scholars are required… indeed, are urgently necessary, in the present conundrum. But they need to crack the workings of a derivative, the materiality of a trading floor, or the cultural problems behind economic calculation. This is the work that the social studies in finance (SSF) has been silently doing for a decade. And this is the work that we would like to showcase to management scholars. The work of Michel Callon, Donald MacKenzie, David Stark, Karin Knorr and other academic figures already speaks to the potential of this area. In this symposium, we bring it all up by way of our own work.
How are we doing this? First, we invited Bruce Kogut and Jerry Davis to kick-start and wrap-up the discussion. They accepted right away. In the first of the presentations, Fabrizio Ferraro and myself will present our research on socially responsible investment – the meeting point between valuation and social values, between Wall Street and the rest of the US. How does it work? What infrastructure is there to translate “good and bad” into “buy and sell”? We will be sharing the results of our ethnographic work in Manhattan at a leading socially responsible investment fund.
Next, Klaus Weber and Simona Giorgi will present their work on yet another market device – securities analysts, their reports and their style. Very few scholars have looked at analysts from a cultural standpoint. Weber and Giorgi do just that, and what they find is very surprising: the rhetorical style of analysts, they argue, is a key component of successful analysis. Style, persuasion, narrative… are words that need to be urgently incorporating to an organizational view of finance.
The third presentation, by Dan Gruber, dives right into the one of the most crucial (and least examined) areas of Wall Street: financial media. What do journalists do? Existing work has barely gone beyond describing them as “information-processors.” This intellectual lameness has left behind the shaping, constructing, enacting and, in short co-producing the public’s perception of what goes on in Wall Street. Gruber examines this with a penetrating ethnographic eye cast on midtown Manhattan.
The fourth presentation, by Yuval Millo, brings for the first time to the Academy of Management one of the two celebrated authors of the seminal article on the performativity of Black-Scholes. Millo tackles the question that so many scholars have been asking in Phd seminars and academic corridors: is it possible to perform a model that is inaccurate? Can an economy really be so twisted? I won’t give the full answer away here. But I’ll say that Millo will present a historical sociology of the early Chicago market, discuss the regulatory and risk-management tools at the time, and how they were superseded by Black-Scholes.
All together, the symposium promises a fresh look at the freshest (and toughest) of contemporary economic problems: Wall Street, from below. Luckily, the powers that be at the Academy have recognized the importance of this event, and made it a showcase symposium of the OMT, MOC and TIM divisions.
Monday, August 11, 10:40AM – 12:00PM Anaheim Marriott, Grand Ballroom – Salon F
We hope to see you there.