The recent crash of the US financial system can be summed by one word: Greed. All over the country individuals have been suffered due to the greed of few. Mortgaged backed securities were sold, resold, repacked, and sold again in an effort to make profits. Well, the house of cards fell almost as fast as it did for Enron.
While applying to colleges I always knew I wanted to become a business major. Something about marketing has always called to me and I wanted to learn about more technical marketing techniques. So too did I want to learn about the financial markets, which had recently crashed while I was thinking about college. During a recent finance class during ICore, which is a defining semester in the Kelley School of Business, my professor, who used to work in the financial industry said something interesting. Last year, while people were protesting in the street of Bloomington, IN against Wall Street, a lot of blame was put on our school of business. What should be a sense of pride become a polarizing idea.
Business schools have been blamed for causing the financial meltdown because people mistakenly say that they teach greed. This is not the case at least at Kelley. Through the first three weeks of ICore, in which we take four classes, one marketing, one strategy, one operations, and one finance class, the theme has been creating added value. Regardless of what you are doing in business the failsafe way to be successful is to add value. This is the antithesis to what many on Wall Street were doing. By taking high commissions and hedging large bets on risky investments, many on Wall Street were detracting value.
The investments that were being made were bad not only because there were risky but because they were unnecessarily risky. When making an investment risk must be less than or equal to the potential reward. To do this the three inputs, the initial outlay, the time, and the rate, must work in accordance. Although it was possible get great returns via these risky securities it did not make sense; the interest rates were too low. There is where value was lost. When the interest rate is too low the reward will never be large enough to outweigh the risk. Ergo Wall Street was taking away from society.
At Kelley we are preached to, and rightly so, about ethics and adding value. Our law department in the school is called Business Law and Ethics. Although my professor did say he was much more about the law than the ethics we spent about two weeks talking about it. This cannot be overlooked. The best schools in the country, which are producing the brightest talents, must continue to preach this. No longer should individuals be able to graduate from a business school without understanding what is ethical and what is not, when does risk equal reward and when does it not, and, lastly, when are they actually adding value to society and when are they subtracting from it.