Who needs an executive course in the sociology of finance?
March 27, 2014
In a dark television studio atop one of the LSE’s towers, this morning I was interviewed by Mark Jackson, marketing and recruitment manager of the LSE Executive Summer School. Here’s a summary of the interview.
Mark Jackson: Please give a brief overview of your course.
Daniel Beunza: The name of the course is “Sociology of Finance,” but perhaps the subtitle is more to the point: “Networks, Culture and Performance.” The course builds on a paradox, which is that while models and equations are necessary to get a foothold in finance, getting ahead in a bank or a fund depends much more on your networks, your fit into the culture, and on being perceived as a leader. None of the courses on finance out there teach those skills. That’s what this course is about.
Mark Jackson: Could you give me some examples?
The course starts with the notion of bank culture. How to be an effective manager, when your employees are traders and investment bankers? Not an easy task. For instance, how do you deal with a star trader who is aggressive to the point of toxic? We explore the tensions between financial performance and what sociologists call “normative control”.
This session is followed by a day on modeling, and especially on how to benefit from the power of models while avoid the blind spots that they might create. We talk about the role of social cues, and about how to combine the use models with social cues from one’s network, and more generally on the danger of cognitive “resonance.”
The third day is devoted to algorithms in finance. We discuss high frequency trading. How it works, how to automate an organization without giving up the human element that made it competitive in the first place, etc. We might include a visit to one of the financial exchanges in London.
Our fourth session day focuses on the social dynamics of valuation. As much as the financial value of a company depends on the existing data about company performance, at any one point in time there are multiple value estimates out there — and financial analysts typically argue about valuation with one another. How to navigate these controversies? We also consider what the social and interpretive aspect of valuation means for companies who want to communicate with their investors, i.e., for investor relations. How to structure an effective message? We’ll do some interesting role plays.
The final day looks out to the future, and considers the rise of activist investment, of private wealth, and responsible investment. On this last point, we ask: does investing in environmental companies make sense? Under what conditions and in what investment styles? How can other organizations –data providers, technology vendors, etc.– benefit from it?
Mark Jackson: Describe why your course is relevant to today’s global executives.
This course is aimed a senior managers of banks and hedge funds, as well as risk managers, financial consultants and regulators. More generally, it is aimed at professionals who are seeking career advancement by understanding the managerial and social aspect of finance.