Wednesday, May 1, 2013

MBA Professors: Who's the Best?

NYU's Damodaran: Finance Pundit
Take any prominent business school, any of the schools recruiters and prospective applicants gush over. There is likely on campus a well-known, popular, favorite teacher, a campus legend who exudes business-school royalty. That professor would be the one whose course is in saturated demand and is a hot attraction.

That's the professor who has the knack for making corporate finance or economics lectures sparkle, who ignites the classroom with animated discussions of business decision-making, business strategy or financial maneuverings. She is the professor who delivers the lecture in operations research or derivative products with verve--an actress at the podium who explores a business-school case as if it were a movie script.

He would be the professor, an expert in his field, who commands in-depth knowledge in his subject, who has written tirelessly on the topic, and who is likely the industry's go-to source to explain to the public a financial trend, a theory of markets, a marketing ploy or the science of pricing goods. 

In finance, she would be the professor who transforms an intermediate accounting lecture into Broadway drama, successfully able to explain concepts of cost of capital or cost of goods sold with conviction and passion. And her students would get it.

In the world of business schools, lists abound everywhere: lists of top schools; lists of top places to study finance, marketing or non-profit management; lists of schools whose graduates have the highest starting salaries, and lists of schools most favored by recruiters.

There are now even lists of top professors.  How is it even possible to assess, rate and rank thousands of MBA professors across the country in an unbiased way? How do you assess fairly what it means to be a top professor? List-makers do it regardless, notwithstanding the subjective, whimsical nature of rankings.

Disregard for a moment the validity of rankings and lists. You might notice one name that tends to appear on many lists of top MBA professors, partly because he is indeed a highly respected professor. Or it's partly because he is popular with students, who fawn over his lectures and dive into his blog postings and writings. It's partly because they absorb his message and are stirred by it enough to jump into the dialogue. It's partly because of his masterly manner of communicating, an ability to explain finance in ways that are colorful, relevant and intriguing.

That professor would be Aswath Damarodan, a corporate finance professor at Consortium school NYU-Stern (who has likely taught dozens, if not hundreds of Consortium students over the years).  He has written several books on corporate finance, taught a generation of students at Stern, and, thanks to the the breadth and immediacy of the Internet, has blogged weekly on just about any finance topic he feels deserves his attention, insight and analysis. In a typical blog posting or essay, he explains the topic, provides analysis and shows trends, adds background, adds insight, and, as if he can't wait, offers a striking opinion. Sometimes it's an opinion that bites or hurts or certainly goes against popular discourse.

There are few finance topics he isn't afraid to address. His willingness to reach out to students (and alumni and just about anybody interested in finance), his eagerness to engage in dialogue with the public are likely a prime reason he appears on top-prof lists.

His blog postings, for sure, could be required reading for advanced students and even jaded investment bankers who might want to understand (big picture) the business they conduct (although his tone regarding investment bankers won't win fans from this crew).  His postings and explorations of ideas might help bankers and company CFOs understand whether the direction they are headed in  a deal is a path that benefits shareholders or a path that leads to financial doom.

In arguably the biggest corporate-finance headline of 2012 ("What should Apple do with its billions in cash?"), Damodaran gladly inserted his views, an analysis that would earn in buckets of fees if he were the mandated adviser.  Providing a fresh valuation of Apple shares, he conveys his blunt disappointment in Apple CEO Tim Cook: "I see Mr. Cook go from forum to forum, saying nothing of substance and wreaking havoc on the stock price almost every time he talks."

(This week, he updates his occasional analysis of the company, based on recent earnings, and he decides it is still safe to hold on to Apple stock, if you hold it. He had not yet analyzed the details of Apple's $17 billion debt offering, although he suggests accruing more debt could be a good thing at Apple.)

Damodaran has built his reputation and star power at Stern over 27 years.  He holds an MBA and Ph.D. from Consortium school UCLA.

The postings, his writings, and in-class discussions link finance theory and traditional analysis to current events, but he is not wedded to old theory.  For the most part, he tries to make sense of what's going on and then provide a passing point of view.

In early 2013, with gold markets headed for a free-fall, the professor stepped in to help students and his followers put some common sense around investing in gold. Damodaran, like many experienced investors (including guru Warren Buffet), wonders what's the big ado and fascination with gold as an investment, yet explains one or two cases where, in fact, investing in gold should be part of a balanced portfolio.

Damodaran won't hesitate to recommend the best way for a company to manage its balance sheet or shape its capital structure or the best strategy for buying back stock or paying a dividend. He didn't hesitate to declare that most large-scale acquisitions don't make sense in the long term.  Moreover, he says companies ought to do much of the deal or valuation analysis themselves and shouldn't rely too much on the conflicted advice from investment bankers.

Activist investors, such as those who have pursued an agenda with companies like Apple, JCPenney, and Herbalife, grab much of the publicity in the financial press. Some call for significant transformation in the company, whether in the board room or in production lines.  Some, well, hold companies hostage to get their agenda on the table, if only to trigger a quick short-term surge in the stock price.  Do they act against the objectives of long-term strategic investors?

Damodaran examined the question recently, weighed all sides, and decided in the end that the two groups don't act against the interests of the other.  Short-term activists, he argued, really look out for the interests of strategic investors.

Drama, flair, style and energy thrust teachers onto lists of best professors.  Damodaran, as former students would attest, has some of that, but his writings, teachings and spontaneous, well-reasoned observations about what surrounds him in the marketplace are what keeps him there.

Even the most astute MBA students in finance and those headed for cubicles at Morgan Stanley, Carlyle or Blackstone can praise his efforts to "break it all down" and tell the real story of what's going in financial markets. Consider his "Musings on Markets" a must-read for both first-year finance students and senior deal-doers.

Tracy Williams

See also:

CFN:  Most Popular Business School Professors, 2011
CFN:  Professors and the Global Imperative, 2012
CFN:  Most Satisfied MBA Alumni, 2011

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