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18 Apr 2012 Back

Financial Crisis - A World of Opportunity

VIEWPOINT: Professor Ignacio de la Torre – Academic Director, Master in Finance Programs, IE Business School.

Professor Ignacio de la Torre is bullish with optimism in spite of - even because of - the latest financial crises: “This provides us with a world of once-in-a-lifetime opportunities,” he says.

Speaking before a talk entitled Financial History: What Can We Learn from Our Mistakes? – the Director of IE’s Master in Finance Programs outlined the less well-documented ‘glass-half-full’ view of the on-going global financial turbulence.

Financial crises give rise to positive change: “Look at the US - in the 6 years after the banking crisis of the early 1980s the US economy went from being made up of 20% markets and 80% banks – to vice versa.” That was a big, positive change in just six years – brought about by a financial crash. “I’m optimistic about Europe today because countries will finally take on reforms they haven’t looked at in 60 years.

A big opportunity for positive change for de la Torre is the chance to educate a new generation of socially responsible financiers – something that, in his role at IE Business School, he feels both duty-bound and well-positioned to do. Deciding what and what-not to teach young, soon-to-be influential financiers is a big responsibility and one of the big decisions he has made at IE is to take certain ‘long-term view’ modules – and make them compulsory for every finance student.

Tellingly, Risk Management – is compulsory. “You can’t trust human ethics because, when a human is threatened with losing his job unless he meets a target – his ethics are compromised,” de la Torre explains. Less obviously - Financial Crisis’ History – is also now compulsory. De la Torre believes in teaching a “horizontal knowledge of finance” – “and being an expert in a particular field of finance.” This means compelling students to look back at the history of finance and ensure that they learn from past mistakes: “The study of wars has helped us avoid many wars, so too should the study of economics help us avoid future financial crises.”

Lastly, Financial Inclusion – is now compulsory too. Professor de la Torre describes Financial Inclusion as “Teaching what financial tools it takes to lift the poor out of poverty.” According to de la Torre more and more IE students are opting to spend three months of their Masters promoting microfinance in Ghana to help eradicate poverty. De la Torre, who made a similar choice to work in Africa as a young financier says, “That experience impacts a young financier’s life - and impacts the decisions they make, right throughout their lifetime.” 

(De la Torre passionately believes that; “We have a once in a lifetime opportunity to couple technology and finance to lift people out of poverty in Africa.”)

Educating Masters in Finance students to think horizontally, holistically and responsibly - is one thing, but de la Torre believes in educating the rest of us in the fundamentals of finance too. Responsibility for the financial crisis falls at the feet of many distinct parties; central banks, policy-makers, investment bankers, regulators, commercial bankers, and - as de la Torre points out – consumers too.

There is an inherent and unhealthy asymmetry to financial knowledge,” he says – with the bankers holding too many of the cards. “Compulsory education in basic financial concepts for students aged 14 years and up would completely change the relationship between banks and consumers,” - across the board, less risk would be offered and less risk taken because the understanding of that risk would be more mutual.

De la Torre’s underlying message, his ‘secret of life’ if you like, is inspiringly up-beat: “Despite the crash – things are good. The news might be negative, but one look at the history books tells you we’ve never had it so good. Be happy with being now. The idea that things used to be better is a myth. Things are much better now than they ever have been. 80 million people leave poverty every year – that’s the best it’s been in world history!” “Try and understand the roots of happiness. Fight the human tendency toward ‘comparisons’. Spend less time in the gym and more time exploring and bettering your mind! Help others – that is a big part of happiness. And don’t become attached to physical possessions…” – and all this from a Professor of Creative Accounting! – Ignacio de la Torre, The Philosopher Accountant.

In fact, de la Torre is perhaps at his happiest discussing Happiness Economics (he strongly recommends Richard Layard’s book Happiness). He speaks with great feeling on the need for young financiers to – essentially – rise above the current consumerist compare/attain system – and understand the true roots of happiness. He says, while capitalism is what drives society forward – it is also important to recognise its flaws. “There is something fundamentally wrong with the system,” he says – a system that is based on these negative drivers of ‘comparison’ (who has the nicest car). It is refreshing and encouraging to hear these healthy, balanced (even spiritual) modes of thinking are being instilled in IE’s young financiers.

Further information
IE Business School - Masters in Finance Programs
IE Business School - Executive Education
IE Business School - profile on iedp



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