Thomas F. Cooley is the Richard R. West Dean and the Paganelli-Bull Professor of Economics at New York University Stern School of Business, as well as a Professor of Economics in the NYU Faculty of Arts and Science. He was appointed Dean of NYU Stern in 2002.
The former President of the Society for Economic Dynamics and a Fellow of the Econometric Society, Dean Cooley has received numerous awards for his teaching and is recognized as a national leader in both macroeconomic theory and business education. He is a widely published scholar in the areas of macroeconomic theory, monetary theory and policy and the financial behavior of firms.
Before joining NYU Stern, Dean Cooley was a Professor of Economics at the University of Rochester, University of Pennsylvania, and UC Santa Barbara. Prior to his academic career, Dean Cooley was a systems engineer for IBM Corporation. Dean Cooley received his BS from Rensselaer Polytechnic Institute, and his MA and PhD from the University of Pennsylvania. He also holds a doctorem honoris causa from the Stockholm School of Economics.
Topic: Thomas Cooley on Finding Success in a Downturn
Cooley: I’m Thomas Cooley. I’m the Dean of the Stern School of Business at New York University. I’m also a professor of economics.
Question: Is there a bright future for business school graduates?
Cooley: Well, I think there’re going to be a lot of new opportunities in other sectors, where we see people being interested in entrepreneurship so there’s a greater emphasis on wanting to create new businesses, new business models. There is a lot of interest among our students in social entrepreneurship. It’s really an interesting generational shift that’s occurred. And we see more people who want to do well and do good at the same time. There are going to be jobs on Wall Street. There’ll be different jobs. They won’t be as highly compensated. But there’s always going to be a demand for people to manage assets, to restructure businesses, to negotiate mergers and acquisitions. So our students, if they have a passion for it, are still going to seek jobs in finance. And they’re well-aware of the fact that this crisis is going to have on their economic prospects but they still see that as an interesting industry to work in. And… You know, I think the number of jobs in the compensation will shrink but they’ll still be there. The other thing that’s… that interest a lot of people nowadays is media and technology. I think, it’s very difficult to tell how the media industry is going to evolve. It’s clear that it’s going through a crisis of its own, of its very own making in some sense and… But a lot of our students see real opportunities on the other side of that. So it’s an interesting… an interesting evolutionary time.
Question: How should entrepreneurs approach the new economic realities?
Cooley: It’s a very different environment. And the, you know, the search for seed money and seed financing and that sort of thing are more difficult than an environment like this. People are more sensitive to risk. At the same time, I think it’s a time of opportunity because it’s a time when emerging businesses, firms that have a good business model can acquire talent, can find more people willing to take on some career risk in order to pursue an idea and really put in the sweat equity that’s required to succeed in an entrepreneurial venture. So, I think in… You know, that’s the upside of it. That there’s more talent available, who are willing to take those kinds of risks and they see the risk reward tradeoff as being a good one at this point in time, better than it would be when the alternative is some enormously paying job at an investment bank.
Question: Where are the greatest opportunities?
Cooley: Well, I… I think the most exciting opportunities are… that… I mean, the most exciting business plan that I’ve seen are people who are really looking at taking advantage of the opportunities and alternative energy and green technologies. Also in the healthcare field, I think there’s an enormous amount of entrepreneurial enthusiasm about improving the healthcare system and the healthcare delivery system and finding new technologies for managing and delivering healthcare. The interesting thing is that these are all… that these are all things that reflect priorities that we have set out as a nation. And they are, in some sense, very underdeveloped sectors that are… that haven’t been invested in to the extent that other sectors have. Probably far too much creative energy went into the world of financial innovation not enough into, you know, healthcare innovation and alternative energy innovation. So I think we’re going to see some very exciting developments in those areas.
Question: What are the biggest mistakes leaders make in a crisis?
Cooley: People tend to discount the possibilities of extreme events. And so, just as a few years ago, people were probably way too shortsighted in how they thought about developments and finance and real estate. You know, now, there’s probably a tendency to be a bit too shortsighted about the problems that are created by the current downturn. Right now, I think that people have to understand that as bad as this recession is and will be for a little while, it will end and we’ll come out of it and that… that represents an opportunity. I’ll give you an example of this. There’s a phenomenon in economics that people talked about, called the great moderation. Ben Bernanke, the chairman of the Fed, wrote about the great moderation. And the phenomenon is this, that beginning in the early 1980s, the volatility of the economy and economies throughout the developed world decrease so they didn’t fluctuate as much. And after 20 years, we began to sort of study this as a phenomenon. Is it due to innovation? That’s one theory. Was it due to better central banking? That was another. But a third possibility is that we just had 20 years of pretty good luck. But once people built in to their expectations that lack of volatility, you know, even the recessions we had in that period were relatively mild and short-live. So I think that people began to discount risk way too much. They did not understand or did not want to face the reality of what the risks are. What is the risk of giving somebody a mortgage that they can’t afford on hope that the house is going to appreciate in value? But it’s a mistake that… that’s… that made over and over and people tend to forget about it.
Question: How should leaders communicate bad news?
Cooley: It’s certainly true that if business leaders convey truthfully, all the things that they were worried about, it might have the effect of a self-fulfilling prophecy. But what is true… what’s striking to me about the current situation, the current business environment is how few business leaders have stood up and stood out as principled, articulate spokesmen… spokespeople for what policy should do, for what businesses should do. There are no business leaders. In the panic of 1907, it was J.P Morgan who rushed to the rescue of the financial system in the US economy. And there is no one with that kind of clout in the modern world, no one even willing to stand up and speak out very much. It’s been astonishing how silent business leaders are.