I grew up in the New York City suburbs. I was an indifferent student, and I still owe apologies to my high-school teachers. I spent a lot of my youth playing chess and traveling to tournaments, which took up most of the time I should have spent studying. The good news is that it is possible to get a chess fix online these days, and the best place to do that is at chess.com. If this existed in my childhood I would never have left the house. These days, I try to spend no more than two hours a week there. The operative word here is “try”.
I came to Yale as an undergraduate in 1985. I had no clear idea what to do with my life until I met James Tobin. He was a Professor of Economics and Finance at Yale, and the Nobel Prize winner in Economics in 1981. I worked for Tobin for three years as a research assistant. Tobin was one of the giants of 20th century economics, but never lost his Midwest modesty. He treated everyone with dignity and respect – even research assistants who made mistakes on simple tasks. I decided I wanted to be like him when I grew up. This has turned out to be an impossible task, but the effort remains worthwhile. Professor Tobin died in 2002. You can read tributes to him here and here.
I got my Ph.D. in economics at Harvard in 1994. My thesis advisor was Eric Maskin, who won the Nobel Prize in Economics in 2007. I think I embarrassed my advisor by writing perhaps the silliest dissertation in the history of the Harvard economics department, including chapters about the Jeopardy! game show and about betting on the NCAA basketball tournament. The specific papers may have seemed whimsical, but the main idea was serious: “how do people make decisions?”
After graduation, I stayed at Harvard for five years as a junior faculty member. I continued to be interested in my dissertation topic, but there are only so many game shows in the world that one can study. I decided that financial economics would be a great field for someone who loved data and was interested in decision-making. I started writing finance papers in the late 1990s and moved to Wharton in 1999.
Wharton was a wonderful place to do research in finance. It is huge department, and for any question you might have, there is someone there to answer it. When I arrived at Wharton, there was a need for someone to teach venture capital. I did not know much about it at the time, but I volunteered and took on the course. This turned out to be a great experience, and I taught various venture capital and private equity courses for the next ten years. In 2006 I published a textbook on the topic. I still get many questions from students who would like to get into venture capital after they graduate. The sad reality is that this is very hard to do. How hard? Check out this video from the Wharton Follies 2006. I play the bald guy.
In January 2008 I moved to the Yale School of Management, where I am a professor of finance. So I came back where I started (sort of). Just after I moved, the whole financial system started to collapse. The first big event was the fall of Bear Stearns in March of 2008. This event hit very close to home for me. I worked at Bear Stearns for three summers during college, and I had a great learning experience with a job that allowed me rotate across almost every department. I did not go to Bear Stearns after college, but my father did join in 1989, and he worked there in some form right up until the end.
Since 2008, I have focused on financial crises as my main area of research. I have an enormous amount left to learn, and I am not alone. The recent financial crisis made clear large gaps in our understanding of the modern financial system and the role it plays in the economy. I got a chance to practice what I preach while working for President Obama’s Council of Economic Advisers from 2009-10. Like many economists in Washington that year, my time was spent mostly on attempts to stop the bleeding from the financial crisis and to make plans to prevent the next one. I was on leave from Yale but not far from Yalies – click here to see a picture of three students of James Tobin sitting together in the Oval Office.
My midlife financial crisis also led to a complete change in my teaching, with all my courses now relating in some way to financial crises. I teach a PhD course on “Financial Crises” with my friend and research collaborator Gary Gorton, I have learned an enormous amount from Gary, and this learning continues every time we teach together. I also teach an elective course for MBA students and undergraduates on “The Global Financial Crisis”. This course is co-taught with Timothy F. Geithner, who had a front row seat to everything that happened and shares this unique perspective with our students. The lectures for this course are also available for free on Coursera. You can view an introduction to the course here.
My research, teaching, and service activities all come together in the Yale Program on Financial Stability (YPFS), where I am the faculty director. The YPFS produces cases and analyses, holds academic conferences, and brings together scholars and policymakers to prevent (and prepare for) the next financial crisis.