This blog post is an excerpt of an article Rebecca Dohrman, a senior lecturer in management communication at Olin, wrote for “Real Leaders.”
For emerging leaders, there’s a lot to focus on. Avoid getting overwhelmed by all of the potential options, which will only hinder your progress or lead to early burnout. Instead, focus on building and expanding on these three specific skills:
1. Accurately draw conclusions from data.
A tremendous amount of data is available to leaders. Next-generation leaders need to create systems—dashboards, automated reports, or live data pipelines—where they can instantly access meaningful, purposeful data and accurately draw conclusions. This kind of data goes beyond quick performance indicators. Instead, it allows the leader to study long-term trends and competitive strengths and weaknesses so that each can be handled appropriately.
2. Practice genuine empathy.
Thanks to technology, we know more about one another than ever, and we expect to get a sense of the humanity of one another. Likewise, we expect empathy in business leadership. Modern professionals want leaders who don’t see a binary split between running a business that is strong financially and respecting the diverse group of people who work there. They want both. The leaders we most admire achieve core business goals while also treating people well and building a culture that attracts and retains talent.
3. Master interpersonal communication.
Good leaders are strong communicators. People in leadership positions must be able to speak well on a public stage and communicate effectively with professionals at every level of their company—from the new hire right out of college to the senior executive they have worked with for a decade. The strongest leaders will specialize in strong interpersonal communication and will galvanize a culture behind their leadership style as a result.
Brittany Almquist Lewis, assistant professor of finance at Olin, recently investigated part of the global financial crisis of 2008-2009.
Lewis
Her focus: independent mortgage companies, which operated outside the commercial banking sector. (Such companies made up a third of the mortgage lending market before the financial crisis and have grown to 50% of the market post-crisis.)
Unlike banks, these mortgage companies didn’t take deposits. They didn’t get insurance. They weren’t regulated. But, as Lewis said, they could do “risky things.” And they did.
The mortgage companies relied on credit-line funding—heavily. Yet, no direct evidence existed about who their funders were or how they operated, Lewis said.
“These questions have important implications for financial stability—not only for the housing market but also for commercial real estate and collateralized loan obligations.”
House of cards
Lewis hand-collected data on 12 of the largest public independent mortgage companies’ credit lines between 2004 and 2006. She established the following:
The credit lines were collateralized by mortgage loans;
The credit lines took the form of master repurchase agreements (contracts defining the purchase and resale of collateral) or “repos.”
The credit lines were funded by the largest, interconnected dealer-banks, such as Credit Suisse, UBS, Lehman Brothers and Bear Stearns, to name a few.
Lewis also collected data on the value of collateral that dealers reported was eligible for reuse.
By connecting a dealer’s collateral to the same dealer’s funding, she was able to causally link dealers’ increased credit supply to an act that Congress passed in April 2005: the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA). She then used mortgage-origination data to analyze the resulting impact on households. Her research resulted in the paper “Creditor Rights, Collateral Reuse, and Credit Supply,” accepted at the Journal of Financial Economics.
“They are all dependent on each other. As soon as one link broke, all the links would break.”
Brittany Almquist Lewis
As it turned out, Lewis discovered that BAPCPA, which changed the bankruptcy process for mortgage collateral before the financial crisis, contributed to the housing boom—and the bust.
BAPCPA granted special treatment for repo trading using mortgage collateral.
The change allowed mortgage dealers to overleverage assets—and allowed them to take on more debt backed by those mortgages, Lewis found.
In addition, her research found “an increase in the re-use of these assets, meaning that two dealers could have money extended with the same mortgage assets backing both trades,” she said.
Think of it as doubling the leverage of what’s recorded on the dealers’ balance sheets.
Plus, Lewis learned, the BAPCPA policy change led to the decline of the underlying assets themselves: The quality of the mortgages was deteriorating.
Hence, fragile mortgages ultimately backed the interlocking trades of large dealer banks.
“If one of these trades fell, it would be like a house of cards,” Lewis said. “They are all dependent on each other. As soon as one link broke, all the links would break.”
The situation “was setting up a perfect storm.”
Silicon Valley Bank
Why is this relevant today?
“None of these things are at play in the financial sector right now,” Lewis said. After the financial crisis, the Federal Reserve brought dealer-banks under bank holding status, making them part of the regulated banking sector. “Now they’re actually banks.”
In addition, “they don’t have these interlocking repo chains that are all backed by the same mortgage assets. And the assets themselves are not deteriorating in quality.”
Silicon Valley Bank’s collapse in March after a run on deposits was not the subject of Lewis’ paper. But her research, she said, does give an argument for why US taxpayers should not bail it out.
“We have a totally different environment with the run on SVB than we did during the financial crisis,” she said.
“Some banks, yes, are going to be connected to it, but they’re not the largest banks. They’re not the 12 most systemically important banks in the United States.”
In the global financial crisis, the interlocking banks were the most financially important, including Lehman Brothers, Bear Stearns, Goldman Sachs, Bank of America, Credit Suisse, UBS and others, all with close to a trillion dollars and more in assets, Lewis noted.
SVB didn’t have anywhere close to those assets. Yes, it had uninsured deposits, and tech firms ran on those deposits, Lewis said.
“But the tech firms themselves aren’t necessarily failing, and they aren’t backed by other banks, and the banks aren’t trading debt that was repackaged and then resold to really large, systemically important banks,” she said.
“These houses of cards are not stacked in the same way that they were stacked before the financial crisis.”
Lingxiu Dong, a professor who studies supply chain management at Olin Business School at Washington University in St. Louis, has been installed as the Frahm Family Professor of Supply Chain, Operations, and Technology.
Provost Beverly Wendland presided over the installation ceremony, which took place February 6 at Olin. Dong’s installation address, “From Search to Research: My Academic Journey,” detailed her educational path from computer science to mathematics and then industrial engineering and engineering management. She told the audience that she was glad she was open to new possibilities and continued exploring until she found what she loves to do.
Dong also discussed the overarching themes of her 20-plus years of supply chain research, which include operational flexibility, or the ability to operate effectively in a constantly changing environment, and integrated risk management.
Donald R. Frahm, an Olin alumnus and retired chairman and chief executive officer of Hartford Financial Services Group Inc., established the endowed professorship in 2004 to honor his family.
Radhakrishnan Gopalan, a beloved professor of finance at Olin, lost his battle with cancer on December 6, 2022. He was 50.
He and Dean Anjan Thakor were close friends. The loss of Gopalan was a blow not only to him, but also to the entire Olin community.
Fast forward to February. Thakor announced the Radhakrishnan Gopalan Memorial Scholarship in an email he sent to faculty, staff and others in the Olin family. Now the Olin Blog is spreading the news.
‘I’m sure you share my sorrow’
“For those of you who knew Radha, I am sure you share in my sorrow,” Thakor wrote. “He was a prolific scholar, a brilliant mind and a passionate educator.” Also, he was a devoted father and husband we will remember for his kindness, the interim dean said.
Radha joined the Olin community 2006 as a member of the finance faculty. He steadily rose in esteem and responsibility, finally serving as the academic director of Olin’s Mumbai-based Executive MBA program in partnership with IIT-Bombay.
Exceptional scholar
“As a scholar, Radha was exceptional, and I was privileged to coauthor several research papers with him,” Thakor wrote in a tribute on the Olin Blog the day Gopalan died.
“His research into corporate finance, corporate governance, emerging market financial systems, mergers and acquisitions, corporate restructuring, entrepreneurial finance and household finance has been widely cited. Indeed, Google Scholar notes nearly 4,000 citations in his career, more than half just since 2017.”
You can read Thakor’s full tribute to Gopalan here.
When St. Louis City SC takes the field for its home opener Saturday, March 4, Major League Soccer (MLS)’s newest expansion team will celebrate many firsts that will have a game-changing effect not just on soccer, but on professional sports as a whole, said Patrick Rishe, director of the sports business program at Olin Business School at Washington University in St. Louis.
For starters, City SC is the first female majority-owned team in the MLS. Additionally, Purina — the team’s kit (aka, jersey) partner — also is female-led.
“To get a professional sports team, you need three things: You need a wealthy ownership group, local fans and corporate partnerships, and you need a brand-new venue that will impress the league. St. Louis had all three of those things, and we also had a female-led ownership group with the Taylor family — that really set our bid apart from the dozens of other cities that wanted into Major League Soccer,” Rishe said.
Rishe
“The organization should be proud of this achievement, and the city should lean into it. Who knows what kind of amplified effects this could have across the league?”
City SC is also the first in the league to have its entire operation in one physical footprint. CityPark, located at Market and 22nd streets in downtown St. Louis, is home to the club’s main pitch, three practice pitches, headquarters (coming summer 2023) and merchandise store as well as the Washington University Orthopedics High Performance Center.
“No other majority soccer team in the country can say that — it’s a real point of pride for the team. Having all of the operations on one campus will lead to a lot of efficiencies. Players can get treatment if they need it next door to where they practice. And executives can stop by the training center, check stock in the merchandising center or run over to the main stadium to check on operations quickly. Having everything in one place will make it more attractive for this club to recruit employees in the future,” Rishe said.
When it comes to game days, CityPark will deliver an experience that is second to none, Rishe said. The club promises to offer the best matchday menu in sports, featuring dozens of local restaurateurs, including Steve’s Hot Dogs and Balkan Treat Box — a level of locally based food sources that is unheard of, he said.
“Couple that with the technology that they’re planning on introducing, making the customer experience faster and more seamless with a lot of grab-and-go, automated concessions so fans do not have to waste time standing in line,” he said. “I think that’s going to be something that will be copycatted across all professional sports.”
Fans can also be proud of City SC’s commitment to sustainability, which includes a pledge to make CityPark a zero-waste stadium, Rishe added.
Breaking records before first kickoff
St. Louis is known as America’s first soccer capital, so perhaps it’s no surprise that City SC is shattering league records before they even take the field for their first game.
“St. Louis soccer fans were clearly ready to welcome a professional team to town. The team received more than 60,000 deposits for season tickets in a stadium that seats just 22,500,” Rishe said.
“And the team’s inaugural kit broke league sales records over a 30-day period before the design was even revealed,” he added. “Undoubtedly, the league will be looking for ways to copycat the team’s success and boost revenues throughout the league.”
Boom for local economy, jobs
Industry-leading gameday experience, top-of-the-line technology and a commitment to sustainability are certainly points of pride for the team and fans. But you don’t have to be a soccer fan to be excited about what the new team has to offer for the community as a whole, Rishe said.
When sports economists talk about economic impact generated by a team or venue, they generally focus on dollars coming into the community from out of town, Rishe explained. Visitors for home games and special events — like the World Cup or youth sporting tournaments — bring new dollars to the community that are a huge boost to the local hospitality industry.
‘I think what the soccer team can take great pride in already is how they’ve changed the look and feel of the western side of downtown St. Louis. They have extended the liveliness and the economic viability of a section of downtown that was previously blighted.’
Patrick Rishe
“The St. Louis Cardinals are one of the teams nationwide that generates the most economic impact because a large percentage of their fan base comes from outside the St. Louis market,” Rishe said. “While it’s unlikely SC will bring in as many visitors as the Cardinals, the new MLS team is already having a positive economic impact on the region.
“I think what the soccer team can take great pride in already is how they’ve changed the look and feel of the western side of downtown St. Louis. They have extended the liveliness and the economic viability of a section of downtown that was previously blighted,” Rishe said.
“Over the past several decades, there has been a struggle to achieve consistent vibrancy downtown. But there’s a lot of momentum downtown, right now, especially with the new stadium.”
The new stadium also has created a ripple effect throughout the area. Already, Maggie O’Brien’s — a longtime restaurant and Irish pub across Market — has been renovated, and The Pitch Athletic Club and Tavern opened inside Union Station. And more developments in the neighborhood are likely, Rishe said.
“The trickle-down effect will have a very real economic impact in the region. The new stadium will attract more out-of-town visitors, as well as more St. Louis County residents, downtown for games and events. Together, this will certainly create additional infusion of tax dollars for the city of St. Louis.”
The addition of City SC and the Battlehawks XFL team downtown also creates more job opportunities in the service sector — jobs that were hard hit during the pandemic. More visitors to the region will fuel an increase in job opportunities at neighboring businesses, too, Rishe said.
Most Americans believe the Securities and Exchange Commission and the Federal Reserve should be politically independent.
That makes sense. A politically driven central bank or securities regulator can lose credibility and reinforce short-term political objectives—to the harm of long-term stability.
Manela
New research, however, finds partisanship among SEC commissioners rose recently to an all-time high. Driving the rise? More-partisan commissioners replaced less-partisan ones.
Partisanship at the SEC even appears in the language of new SEC rules and commissioners’ voting behavior, according to the paper “The Partisanship of Financial Regulators.”
“The Fed and SEC have institutional features that are designed to shield them from the effects of partisanship,” said Asaf Manela, Olin associate professor of finance and a coauthor of the paper.
In recent decades, US politics have grown significantly polarized and are testing those safeguards.
Language-based approach
The four scholars used a proven language-based approach to identify partisan phrases in Congress, such as “red tape” and “climate change,” and reviewed regulators’ usage of them. Basically, they examined whether Republican or Democratic regulators spoke like Republican or Democratic members of Congress.
They found Federal Reserve governors appeared to be “largely immune from the increased partisanship in American society.” The Fed was relatively nonpartisan throughout the research sample period of 1920-2019.
But partisanship among SEC commissioners rose to an all-time high.
The most partisan phrases suggest that Republican regulators favor less regulation than Democrats. For example, SEC Democrats emphasize investor and consumer protection, according to the paper, forthcoming in the Review of Financial Studies. SEC Republicans emphasize regulatory burdens and the unintended consequences of policy intervention.
Partisanship extends to governing
“Partisanship is not restricted to their speech but extends to their governing activity,” Manela said. “Rules are more likely to sound like the partisan language of the majority party in the regulatory body.”
In addition, partisanship at the SEC might affect commissioners’ regulatory philosophies, the study found.
“Many government entities were designed to be immune from partisan influence. The approach here can be used to evaluate whether the rise in partisanship in American society has spilled over into these entities.”
Asaf Manela
The study also documented “a dramatic increase in partisan voting behavior” at the SEC between 2006 and 2019. Dissenting activity increased substantially, and dissenting votes disproportionately occurred along party lines.
Manela said the approach of using congressional speech to examine the speech of non-congressional speech can be applied more broadly. Researchers can use the methodology to see if the US Supreme Court or state and local governments have also become more partisan.
“Many government entities were designed to be immune from partisan influence,” he noted. “The approach here can be used to evaluate whether the rise in partisanship in American society has spilled over into these entities.”
In addition to Manela, the researchers included Joseph Engelberg, University of California-San Diego; Matthew Henriksson, University of Mississippi; and Jared Williams, University of South Florida.
