Dr. Patel's Interview as part of the master class for bachelor and master students of IBS-Moscow RANEPA
Dr. Patel, thank you for the interesting lecture. I have some questions. Why is it important to study behavioral biases in decision making?
The reason I think it’s really important, especially in the corporate finance world, is that the corporate decisions that are made, like merges and acquisitions, like how much debt a company should hold or how much cash a company should hold, are typically made by a very small group of people. CEO, CFO - a very small team of people. To the extent, the behavioral biases of the small group of people impact the decisions they make. That could have large implications for shareholders where large amounts of wealth could be destroyed if an overconfident CEO makes a few bad decisions or an overconfident CFO uses too much debt to finance the company, or uses too little cash to finance the company. So, to me because corporate decisions of big importance are made by a few people, I think it’s important for our students to understand the implications of these biases in decision-making.
Now can we turn to business education? Dr. Patel, how would you describe the current trends in business education? What’s going on and what can we expect in the future? We are deeply involved in it.
So, there are several different patterns, I would say, in business education. Historically, if one thinks of an MBA as business education, the MBA was created for non-business undergraduate students coming into the business world. This is going back 70 years let’s say. That’s no longer the case now. Today a lot of the people going to business school also have business undergraduate degrees. So, we had to change what we do in the graduate business program to build on the knowledge that some of these students already bringing both from their undergraduate practice and from the work experience that they’ve had. We also are finding that there is an increase in group of student from the STEM fields: Science, Technology, Engineering and Math that are coming into the business program. So, we’re seeing a lot of programs merging students from the business school and the STEM program. The STEM students learn more business, the business students learn more STEM. And in this way both group of students learn how to appreciate what the other group does because ultimately these two groups have to work together. So, we’re seeing more of those programs happening across the US as well. The third has to do with the incorporation of big data and data analytics into the business programs. So, separate from Master’s in Business Analytics that many schools already have, the issues is how do you take business students in the MBA program, teach them enough analytics, so that they know how to use analytics to make better decisions. Here we’re not trying to create the data scientists or business analytic students. We’re trying to create MBAs that has a better understanding and appreciation of what analytics is and how to use it in their decisions. So, I’d say that’s another trend that‘s happened. The third obviously is a deeper understanding of cultural issues and cross-cultural issues. The world has gotten more flat, if you wanna call in that. However, we’re also seeing segmentation across geographies. And, so, I think a better appreciation of the true cultural differences and how it affects business and business practices is also there. And then finally, I would say, experiential. It’s not just about the classroom, it’s how do you get students to experience the theories you are teaching them. And that experiential activity has been growing. From a delivery standpoint it’s clear that the use of hybrid models is probably going to continue to grow. Hybrid being not pure online, not pure face-to-face where there is some content that delivered online in a face-to face environment. Seeing things known as flipped classrooms . We’re seeing more of that because students seem to learn better in a flipped classroom environment. It brings an experiential piece. But you can now deliver some content online that they read before or watch before they come in to the classroom. And the classroom time is spent where you are actually getting their hands dirty and applying what they have listened to the night before. On their own they actually implement that in the classroom the next morning. So, there’s quite a few changes I would say that are taking place. Several of these were started years ago. They just continue to grow right now.
In what way can digital economy change the business education landscape? You already started talking about that.
The digital economy has had an impact, will continue to have an impact and its impact will continue to grow. So, one is how do we enhance learning, how do we make learning better by leveraging online content of the digital economy. The digital economy also generates a lot of data, how do you use that data to make better decisions? That’s where the data analytics piece comes in. How do you get students to recognize that there are a lot of pinpoints in current business processes and activities? Is there a way to use the online or digital platform to reduce some of these pinpoints? That’s where the FinTech solutions are coming in. Can we find a cheaper and faster solution using technology? And that’s clearly happening across the wide spectrum of activities. That’s gonna continue to grow.
You’ve mentioned FinTech. What are your thoughts on FinTech and Blockchain technology in general?
FinTech is here. It will be useful solutions to situations where the current solution is either too costly or takes too long. To the extent we can come up with a faster, cheaper solution is in FinTech, it will happen. We’ve already seen that a lot of the traditional firms that were allowing FinTech to come in, in are now responding through their own changes to reduce the likelihood of FinTech taking over some of the activities that they had. Banking, for instance, would be one. A lot of P2P landing went to FinTech. That pulled away certain types of borrowers from the banking system. In some cases the banks wouldn’t let them go, in other cases they wanna make sure they may retain some of it. So,I think FinTech is here . Blockchain. I’m you borrowed Blockchain, not Bitcoin. I’m a bit more skeptical about Bitcoins. But I think the technology than Bitcoin uses has potential. And I think it’s already beginning to impact different industries and how potentially it could get used . To the extent, blockchain technology is secure, requires multiple verification by multiple servers. It’s very hard to manipulate which means there are certain industries that are potentially going to be affected negatively because blockchain can take away some of the insecurity that potentially currently exists. Will blockchain totally replace industries? No. That won’t happen. Thing that would happen is that technology is disruptive. And what I’d do is to create new opportunities for new firms, people to take advantage of blockchain technology to do things faster and better.
And the last question. You mentioned disruptive technologies. How would you describe the major disruptive trends? What are investment opportunities that might arise from technological disruption over the next decade?
Wow. That ‘s a question for a futurist because the disruptions that are happening today are based on technology that have been developed or opportunities that’ve been developed within the last 5 years. So I think disruption is coming in so quickly that it’s really hard to tell where it’s going to go in the next 10 years . You know, when I start thinking about just things that have happening in the last 5 years that’ve been disruptive. You know, hotel industry has been disrupted by Airbnb and VRBOs. Let’s think about Uber. It disrupted a taxi industry. You’ve got Amazon acquiring, let’s say, a grocery store WholeFoods. That’s disrupting grocery store chain. You’ve got autonomous drivless cars when you marry this with a notion of the sharing economy. With autonomous driveless cars we may need only one. Maybe families share cars , maybe we just don’t need to buy a car, maybe we just rent cars autonomously- that’s the big disruption in the whole autonomotive industry. So, I think the existing technology that we see so much disruption come through, trying to predict where it’s gonna go in 10 years is just impossible.
Thank you so much.