In the second and final part of our interview of Dr. Marti G. Subrahmanyam (Charles E. Merrill Professor of Finance, Economics and International Business at the Stern School of Business at New York University), Professor Marti shares stories of his career choices and professional life; and gives his valuable advice, backed by 40 years of solid experience, to the students of IIT Madras, especially for those with a keen interest in finance and economics.
What prompted you to pursue a career in finance and economics?
Well, I was never really a hands-on engineering person, and the courses on engineering did not really interest me very much, mainly because they seemed to be crammed with detail that I felt was not worth remembering.. I believed that the subjects were not taught very analytically, but from a more fact-based perspective. Probably this was because we were young and immature, but I could never see the excitement in engineering back then. I did the minimum amount of work to get a First Class, for fear that my mother would kill me otherwise! But then again, I was not a diligent student by any stretch of imagination.
In my final year, I half-heartedly applied to some universities abroad for Master’s programs in engineering, following the rest of the herd, and even made it to a few places, with assistantships. That was the time when the IIMs at Calcutta and Ahmedabad had just started coming up. But not many people in India had heard of an MBA back then. So when I got into IIM Ahmedabad, I thought that it would be an exciting possibility compared with a graduate degree in engineering, even without knowing what I was getting into. In retrospect, it was a shot in the dark. I had a few finance and economics courses in the first quarter at IIMA , which was when I had my “Aha!” moment. For the first time, I felt truly motivated and inspired by academic work. So I did pretty well there, and won the Gold Medal. I also realized that an academic career would be very rewarding for me, given my new orientation. Nevertheless, to gain some industry experience, I accepted an offer from the Tata Administrative Service – incidentally, I was the first IIT/IIM person to be selected for it – but soon realized that the prospect of being a senior executive in industry held little attraction for me. The next year I found myself at MIT, studying finance and economics in the world’s best department, and got a whole new perspective of things. I had the good fortune of studying under seven Nobel Laureates, including the greats of twentieth century economics – Paul Samuelson, Franco Modigliani and Robert Solow. My own thesis adviser was Robert Merton, also a Nobel Laureate, one of the finest financial economists of our time.
As a finance academic, I find excitement from doing research using my analytical background in applied topics ranging from debt markets to derivatives to corporate finance to international finance. I am also a consultant and adviser to several firms around the world and serve on boards of directors, where I use my knowledge of financial economics, sometimes, but more often than not, simple common sense.
So how has the IIT Madras experience helped you in your career?
I would say that it has given me the ability to face and work under extreme pressure. The five years of intense coursework and quizzes ensured that you can face any situation with equanimity. After IIT, everything else seemed quite easy and manageable.
You also learn to be humble about your own achievements, because you are surrounded by lots of people who are smarter than you. Although I have been privileged to study and teach in some of the most selective institutions around the world, I was never more conscious of this than when I was at IIT.
I learned to ask questions. IITians are a pretty sceptical lot and if you can convince your classmates about your argument on anything, be it your review of a movie, or a mathematical concept, you know that you have a valid proposition to make. Make a sloppy argument and you would be shot down immediately.
Any advice for students who are interested in a career in finance and economics?
I would strongly urge every IITian to gain a very solid grounding in mathematical reasoning, particularly statistics. My mathematical education at IIT was decent, not great. I learned the basics, especially the mechanical aspects, but there’s always a lot more to learn that will prove very useful in life. It does not matter what you are aiming to become – everyone from scientists to engineers to economists to managers to surgeons need to have a strong understanding of mathematics and statistics. Proving a proposition using mathematical reasoning is partly a matter of rigor, but there is also an art to it, and practice helps. To this basic requirement, I would add programming skills. In the future, someone who cannot code simply cannot function in society at any level of sophistication. Some people say that day is already upon us.
My next important advice would be to read a lot outside your class syllabus. IIT is a good place to train your mind and experiment with new ideas. Awareness of current events is crucial. Knowledge of progress in science and technology is equally so. Read important articles and general affairs magazines (such as The Economist) that you find relevant. If you like science and engineering, read the Technology Review or Scientific American or The New Scientist, and other such popular technical magazines, and skim Nature or Science, for more rigorous research. Expand your horizons, and gain a whole new understanding of the world from different angles. A lot of other skills, such as your writing abilities and vocabulary, can directly reflect how well-read you are.
Develop your critical reasoning. Question everything around you. For instance, challenge your professor’s exposition of a topic instead of just taking his words for granted. Do not take everything you read online as true. In this era of the internet, mere knowledge of facts is insufficient. Anyone can get the basic facts from Wikipedia. The real trick is to use this information as background to form concepts, to construct an effective argument, to formulate a hypothesis, etc.
Spend some time on your other hobbies, music, art, sports etc., Academic success is important, but it is not the be-all and end-all of life, or even career achievements.
What exactly are your duties as an independent board member at a company?
An independent director’s job is, first, to check and ensure that the company is compliant with all the rules and regulations: company law, RBI regulations etc.; second, to evaluate the company’s financial performance and risks, and assess if the senior executives are performing well and reward them accordingly; third, to select the CEO and help select his top team; and last, but not least, to help in developing the company’s strategy. In the prevailing regulatory climate around the world, the laws are becoming more stringent and the first task takes up a lot of the independent director’s time. The trick is to ensure that the other three tasks are also paid adequate attention, and I personally take these very seriously, when I serve on a board: I insist that the board plays a serious role in the selection of the CEO, evaluation of the performance of the leadership team, and in formulation of the strategy of the company.
Describe your work as a professor at the Stern School of Business. What do you love the most about your work?
I teach students at various levels, right from the undergrad level to corporate executives to MBA students and PhD students. I love challenging my undergraduate students; I make them think harder at every level, in the undergraduate honors program that I run at Stern. For MBA students, the application of concepts is the key, and not just the concepts themselves, since most of them are headed towards industry jobs. For PhD students, who are being trained to be researchers, I prefer working with them on a one-on-one basis, and like to maintain the old-fashioned “guru-shishya” relationship with them. I have doctoral students around the world and I work closely with them, just as an experienced carpenter works with his apprentices, thanks to Skype and Dropbox. Executives, however, come only to learn the details of how everything works in practice and think strategically, with less attention being paid to the analytical details. A business school professor caters to diverse constituencies and has to learn to tailor his presentations, depending on the audience.
I love all aspects of my job. Whether it is teaching a varied set of students, my research with colleagues around the world, or working with my colleagues at Stern on school affairs, I have a fantastic working life. I enjoy working with young people; over the years, the median age of my co-authors of papers has stayed at 35, even as I have aged. This is one of those rare perks of being an academic that helps keep you alert and young at heart. And, of course, the academic freedom that I enjoy is a unique privilege. No one ever tells me what to do or what to work on. I work very hard when I am in the mood for it, and enjoy my other interests in music, art and travel, whenever it strikes my fancy.
I owe a lot to IITM for shaping my personality, my interests and my perspective on life. It is a debt that I can never fully repay.
I urge all fellow alumni to reflect on how much of their success is due to the education they received at IITM and make contributions to their alma mater to sustain this phenomenal institution for generations to come.