In my current position, I am fortunate to spend a considerable amount of time with corporate executives around the Seventh Federal Reserve District and across the country. In addition, I regularly interact with the members of our head office and branch boards and with members of our various business and academic advisory councils. As you know, the Fed has a wonderful network for gathering economic intelligence. Through these efforts, we learn a lot about the expectations of executives on a variety of issues, including business education. In addition, I am in contact with academia and some very good universities, including the University of Iowa, the University of Chicago, Northwestern, and a host of others. This has given me a broad perspective on research and scholarship, economic policy, and the future of business education in this country.

I want to share with you some of what I have learned about these areas from my many years as a researcher and policy maker and from interacting with leaders from business, academia, and the public sector. My comments are mainly directed toward young academics, especially those from the HBCUs. Like any good storyteller, I will begin at the beginning.

As a young man, I left Atlanta, Georgia, to enroll in the Hampton Institute (now Hampton University), which is an HBCU located in Hampton, Virginia. I should note that later, during my academic career, I taught at several universities, including Atlanta University, another HBCU.

I went to Hampton Institute with the intention of becoming an industrial chemist, but I had a life-changing experience during my first chemistry course as a freshman: I flunked the course. That turned out to be lucky for me, as I then changed my major to economics and finance.

Actually, it is an interesting story. I was a baseball player, and I had a scholarship to attend Hampton. During my second semester at Hampton, my chemistry professor asked me, "Why aren't you attending your chem lab during the afternoons? You've got to go to lab to pass the course." I said, "The lab is at the same time as baseball practice, and I'm on a baseball scholarship." He said, "Son, go talk to your coach; he can work something out." So, being a naive freshman, I went to the coach, and said, "Coach, I've got a problem. Chemistry lab and baseball practice are at the same time. What am I going to do?" He said, "Son, you'll do the right thing." I said, "Coach, you don't understand. The lab is part of the course; it's a big part of my grade." He said, "Son, you'll do the right thing." So I went to baseball practice, and the rest is history.

David Walker recently reminded me about my days as a young Ph.D. student. I was teaching nine courses with six preparations at Chicago State University and writing a Ph.D. dissertation. I taught marketing, management, accounting, corporate finance, investments, and statistics. This was when David was at Northwestern. We agreed that this was not the best way to develop a research career.

Federal Reserve Study

A little later I will address the future of business education. Before I do that, I want to comment on findings from a Federal Reserve Bank of Chicago study that examined key factors behind the economic resurgence of the Midwest. Essentially, the study found that quality education and training in the workforce were key determinants of the success of companies in the region and that education and training in technical areas hold the key to continued progress. The study showed that individuals with technical skills were able to command significant wage premiums over those without. A survey of employers indicated that 42 percent of new jobs in the next couple of years will require some type of computer literacy and analytical skills. The technology associated with the Iowa Electronic Market will be very useful to students.

Our research also found that there was a significant mismatch between the technology being taught in universities and that being used in business. Clearly, technology is advancing rapidly. As business and economics professors, you have to make sure that you are on the cutting edge. The only way you can do that is to be involved with the people who are applying the latest technology to their work. Many universities have added systems like Bloomberg and Reuters to their business school finance and computer labs. Since this is the technology that people are actually using in industry to trade and track financial instruments, graduates from schools with access to these will be prepared to enter the workforce ready to use the technology. That is important. If HBCUs are to produce students who are competitive, they will have to employ this same technology in the classroom.

For HBCUs, the problem has been resource inadequacy; the HBCUs do not have sufficient resources to invest in technology at a level to be on the cutting edge. That is something that needs correcting. Location is sometimes cited as another fact adversely affecting HBCUs. However, although there are not too many HBCUs located in Silicon Valley or Route 128 around Boston, distance is no longer a true constraint on gaining access to the latest technology. This is precisely because this technology actually eliminates distance as a factor. HBCUs need to build linkages with the providers of the technology if they are to close their own particular technology gaps relative to other leading universities.

There are also non-tangible barriers confronting HBCUs and their students. Many people in the African-American community are only now becoming interested in important technology issues as they relate to education in our schools and colleges. Part of the reason for this late emerging interest is the image that technology has had in the community. Simply put, it was not cool to focus on technology. Young people considered it too geeky or nerdy. It is good that this image is changing. We must keep encouraging our young people to take interest in careers in technology-driven professions. We have a lot of young people visit our Bank; one thing we do is show them the technology and how we use it in the Federal Reserve System and as practicing economists. Once they see how universal technology is (computers and electronics), they really become interested, especially when they learn about the significant wage premiums that are being paid to those who possess a working knowledge of the latest technology.

Successful Research

Research and scholarship are surely major parts of the lives of most successful academics. These activities essentially involve the creation and transfer of knowledge. Scholarship often involves the transfer of knowledge from one discipline to another. A lot of successful scholars are good at this. These individuals gain insights from applications in one area and apply them to other areas. A lot of modern finance is being driven by external developments and what many smart individuals are able to learn from other disciplines and transfer to finance. 

I encourage all scholars to read outside your main area of specialization. It sounds counterintuitive in today's world of increased specialization, but I think as a researcher, you will be surprised at how much you can learn by reading other disciplines. You will gain insight into different approaches and frameworks that actually help you to solve the problems that you are facing. I have found this approach to be very useful in my own career. 

Along the same vein, it is always good to take a step back to see what other people are doing, and then make the translation to your work. As a young scholar or researcher, there is a middle ground that you need to pursue. This involves having the right balance between depth and breadth in your research activities. Derivatives research provides an excellent example. Many of the recent breakthroughs in modern derivatives pricing come from a branch of mathematics called martingale theory. This is a branch of mathematics I have studied for more than fifteen years and still have not completely mastered. This body of literature and the results therein have direct application to arbitrage theory and the pricing of financial derivatives. The people who have been able to make the translation from that body of knowledge to the practical world have really contributed a great deal to making our financial markets work better. You can see examples on Wall Street every day. 

Another piece of advice that I offer to all scholars is to publish every idea twice. I say twice because then you will be known as an expert. This sounds funny but I am serious. You should always speak to at least two audiences with your research: fellow researchers working in your area of specialization and practitioners and policy makers who might benefit from your work. It shows versatility if you can write for many audiences. It also gives you notice and presence. That is one thing we economists in the Federal Reserve and other agencies are good at, communicating sophisticated technical results to people who can actually use them. Believe me when I say that policy makers want to use our work. However, if you do not write for them, you cannot influence them. Take my advice, write for more than one audience and translate your research so that people will be better able to understand it and use it. 

Serious scholars should follow a practice of writing expository papers to explain complex ideas to lay people. This forces you to think about the real issues in your area of expertise. We all write technical papers, which get rejected for not focusing on important problems. When you write an expository paper, you really are able to see where the gaps are. In writing such papers, you often identify how much you do not know as opposed to what you think you know. These papers can be the very source of important research ideas for technical papers. 

If you ever want to make a big success in this business, after you have done the quality papers and the technical work, do some expository writing. Just think of the well-known people in your discipline, the leading lights. Why do you know them so well? Your personal knowledge and respect for them is probably based on or influenced by what you gained from reading their expository papers. Although these scholars research the tough problems, they are most often remembered for their clear exposition of pathbreaking results. 

Professor Eugene Fama of the University of Chicago is a good example. I (and, needless to say, many others) was especially influenced by his expository paper clarifying the relationship between risk and return and the capital asset pricing model, although he has published in the technical financial literature much other work that has been equally influential. 

Researchers are always confronted with the choice of working on very hard and very risky projects that promise international acclaim versus those projects that are less difficult and promise less in the way of recognition. My advice to young researchers is always to work on some especially difficult problems but not exclusively so, at least not until you are established. Although you should not work on these types of problems exclusively, you should always have some of this work going on and you should periodically bring the problem to the forefront. 

I learned that lesson from Fischer Black. During his regular trips to Atlanta to visit his daughter (then a student at Emory University), Fischer would stop by to talk about finance. During many of our conversations, he would pull out a note pad and start writing, right in the middle of the conversation. When I asked what he was writing, he would say, "You just said something that triggered a thought that might help solve a problem I have been working on for months." The lesson is that you should keep tough problems on your agenda. Don't bury them forever simply because you cannot solve them immediately. Keep thinking about them; you might eventually make a major breakthrough. 

Clearly, for the difficult problems, there is a low probability that you are going to solve them. However, you should always try to work on them because this will keep your mind engaged and challenged. As I noted earlier, I spent about fifteen years studying the abstract theory of stochastic processes. Actually, I like to tell people that I was studying stochastic calculus before it was in vogue, before Black-Scholes and derivatives were the wave. It took me until 1996 to publish a paper, a pricing model for options based on martingale decompositions, actually using the full force of the theory. I never gave up on the problem, but I did not let it preempt my doing other work. Being persistent is important. 

Another piece of advice is to always give generous acknowledgments. When I mentioned Fischer Black and Black-Scholes, I should have mentioned many others. In this profession, you should always acknowledge those people who spent considerable parts of their careers working on important problems and making contributions to the field. 

Research, although it is collegial, is quite personal. I like to think of the personal side of research as finding a groove. For example, finding the time when and the place where to work that brings out your best. It may only work for you; that is why it is personal. 

When I was younger, I had a groove from midnight until 2 or 3 in the morning. That was when I would get my best ideas, draft my best papers, and I would work on it until I went to bed. Needless to say, between the aging process and a spouse who did not like being disturbed at such late hours, I could not maintain that schedule forever. But, then I found myself going into the library on Saturday mornings and being very productive. Every Saturday morning, I would go to the Emory University library for three or four hours. It was my time to myself, to do my own thing, and it really worked for me. So I would say to you, it is important to find your own groove. But remember, it is probably going to change over time, so be adaptive. 

Career Development

I would like to mention a few things about career choices. First, let me be candid about one of my beliefs. My philosophy is that if you do not love your work, you probably need to change your job. I have always loved my work. I love research and I love policy analysis and implementation. I could never see myself doing work that I did not love. I hear a lot of young people in academia say they hate teaching but love research. Well, that does not make much sense to me because the real mission of the university is to impart the knowledge that professors create or have gained. If you really do not like teaching, consider opportunities in other organizations that allow you to pursue research without teaching. For example, you could become a policy advisor, as I am. In some senses, though, I am a teacher. I have to educate and convince policy makers and others about various aspects of monetary and regulatory policy based on my own research or the research of members of my staff. What I am saying is that if you are a researcher then you are a teacher by default if you want to have an impact. 

Do remember that your research agenda can change over time. You do not have to be wedded to one research agenda for your whole career even though you were trained for it. This is one of the advantages that we have as scholars, academicians, and policy advisors. We can change our areas of interest in response to a changing environment or our personal level of enjoyment. 

I think that all successful scholars have two or three special techniques in their arsenal or bag of tricks. There are probably two or three approaches they use repeatedly in different problem-solving contexts. Where do these tricks come from? Typically they are handed down to the student from an advisor or a mentor. Sometimes you learn them on your own, but it is easier if you have a mentor who shares his or her successful research methods. 

In my case, my advisor forced me to learn the ins-and-outs of bank financial statements. Not only could I read the statements, but I really understood bank accounting and hence, could construct the types of data economists need to carry out rigorous research, but accountants do not typically provide. At that time, many economists had no idea what a balance sheet meant and they had no idea how to construct prices from income statements and balance sheets. By being able to analyze bank financial statements and translate the flows and stocks into meaningful prices, I could examine costs in banking and make contributions to issues related to industry consolidation. Another tool I found useful was indirect utility functions. These could be used to develop empirically specified demand or supply equations without having to go through a full-blown optimization model. Every young aspiring professor needs a few special tools and sophisticated approaches and techniques to apply as they can have great value in the production of important research results. 

Another aspect of career development that should not be overlooked is the opportunity to become involved with professional organizations. As an active member of an association, you will build contacts and, more importantly, make some wonderful friends. Some of my best friends now started as associates in academic and practitioner groups. Experience with practitioners also gives you contacts, so that you can be active outside of the research world. 

My philosophy regarding serving the profession is that the more you give, the more you receive. I learned that many years ago when I gave a lot of myself to the profession. One key activity is reviewing research papers by your colleagues and giving critical but helpful comments. I did a lot of reviewing and in return received a lot of good advice on publishing my own papers. Regrettably I have had times in my career when I would get a paper from a colleague and would set it down and forget about it. It is very embarrassing to see a friend who sent you a paper to comment on, and you did not do it. It is a bad habit, so please do not fall into that trap. Offer your comments and give people feedback even if it is not in your primary area of interest. Remember that there will be times when you want suggestions on your work. There is no way you can be successful in the profession without getting critical feedback on your work, especially when you first draft a paper. 

Finally, to be a successful scholar, you need to "have a life." This will not only relieve some of your stress, but it will involve your family in what you are doing in a meaningful way. A lot of young professors keep their university life isolated from their families. This is generally not good. When your family has no idea what you are doing, it is difficult for them to value the contributions you make to your students, your university, and your profession. When you really have to put in those long hours, they will not understand unless you share your experiences with them. Many business organizations encourage their employees to bring their families to work one day a year. Universities should do the same. 

From time to time, most individuals make significant career changes. The things that we learned as a graduate student will eventually become passé. Most experienced people would agree that they are quite different from when they graduated. So you must be prepared to reinvent yourself throughout your career. At different stages, you might change your mix of research, teaching, and administration. This can be both fulfilling and energizing. 

Teaching and Developing Students into Leaders

I am a firm believer that students need to understand more than just their functional discipline or specialty. They need to appreciate the notions of leadership, competencies, communication, people skills, and the value of knowing how to implement solutions. In many ways, I think, solutions are becoming more like commodities. You can buy them. For example, many banks and financial firms buy a lot of simulations, forecasts, and systems that represent solutions or are capable of generating multiple solutions to problems. This form of outsourcing can save a firm a lot of time, energy, and money. But, oftentimes, it does not solve the implementation problem. Solutions still have to be implemented in real organizations by real people who have to be led. So, please, do not short-change your students on the value of developing leadership skills. I will say more about implementation later. 

Those of us who have had the benefit of a quality education have the opportunity and the obligation to help develop students into leaders. There are many different avenues for doing this and support from FIPSE grants helps. Advising and mentoring students is one avenue; creating opportunities for young people is another. Developing students into leaders should be part of the vision and mission of every university, school, and department. 

Consistent with placing leadership development at the apex of the university's mission can be something even more practical: Make it your goal as a professor to give your students something meaningful to take away from every class that you teach. Many times professors will go through an entire class only to leave the students wondering what they were supposed to have learned. Good professors make sure that they always communicate at least one important idea to their students in each class. You really owe it to your students to give them something to take away from each class. This may be your only opportunity to influence and motivate them. If you are going to be effective, you have to influence. 

I addressed earlier the importance of having students know how to apply new technologies. One excellent motivator for achieving this goal is to use technology in your own teaching. This is the focus of the Iowa Electronic Market program. When I talk to practitioners about what they want in new hires, they always seem to focus on the question of whether students can use technology. Can they contribute quickly to the organization? As stated earlier, it is very important that HBCUs have the latest technologies available for students and that the students actually use them. If students do not have hands-on experience, they are not going to be competitive. 

The Future of Business Education

The traditional view and the vision of the old business school was to focus on teaching principles of good administration. In our familiar business school abbreviations of SBA, BABA, and MBA, there was too much emphasis on "A" for administration. The vision was to produce people who could administer things more efficiently and solve administrative problems. That approach was process-oriented. You were simply given a set of tools that you could use to solve administrative problems. 

That is not the way things are developing today. Business schools are becoming more creative. The schools on the cutting edge are producing leaders and innovators who do more than just make things more efficient administratively. Good implementation is the key. A lot of people can solve traditional problems, but not many people can implement creative solutions. That is the biggest challenge for business school professors and administrators, to develop such leaders. Even in my job, the key is to find creative ways to implement workable solutions. As policy makers, we want to be effective in dealing with economic problems. All of us are familiar with the brilliant economist who is very good at giving "the solution" to a problem but somehow cannot tell you much about how the solution is to be implemented. To restate this using standard jargon: the economist cannot tell you much about how to make the transition from a bad state of equilibrium to a good one. 

Schools that are producing real leaders educate their students on how to implement creative solutions. This generally requires good people and organizational skills. To implement solutions, you generally have to work with people processes and systems. Successful programs develop leaders who understand and can work with people. 

The value system in academia is changing. The old value system was driven by faculty, often in isolation. In some sense, professors (myself included, when I was an academic) have been part of the problem. We were all focused on what we did, what we liked, and what we liked to teach. Business schools were focused around the functional disciplines of accounting, finance, marketing, and management. Departments were very separate from one another, often not talking to one another except to be critical of each other's research rigor or teaching quality. 

That is the old model, and it does not work anymore. Today, the leading programs have a customer or stakeholder focus just like in the private sector. The students are the stakeholders, and they are the product or output as well. These student stakeholders range from young people in their early twenties to graduate students to senior executives returning to the university for specialized programs. Each group has certain needs that have to be satisfied. Business schools have to focus on meeting the diverse needs of these stakeholders if they are to be competitive. Clearly, the success of programs today depends on producing products that are in demand in the marketplace. 

The environment where business schools could simply sit back and wait for good students to appear and for funding to roll in is definitely a thing of the past. Business schools must be competitive. If they do not have an exceptional product to offer, they will not be able to continue to attract the resources that will enable them to continue to produce value-added programs using the latest technology. 

Success in this new environment will almost certainly require fundamental changes in the structure of business school programs and processes. Such changes will involve widespread adoption of cross-functional teaching teams. It means eliminating the barriers between departments, and it requires a balance in how courses are presented. We need to integrate practice with theory. At one time, professors and administrators could say, "We'll develop a theory and we'll educate business in its use." Today, this view has been turned on its head. Practice is actually driving theory, especially in finance. Think about the sources of the great developments in finance. In many ways, Wall Street is far ahead of academia. 

To be sure, good business practice will continue to feed on good research and theory, but the flow in the other direction will continue to intensify. Thus, you must have theory and practice working together. You need to have the right balance. How does practice support the development of theory? This is something that Don Jacobs, Dean of the Kellogg School at Northwestern, has emphasized. He claims Northwestern rose to be the top-rated MBA program in the country by linking the faculty and the business community. They learned from each other about their problems and they worked together. 

I believe that this will be the model of the future. It will no longer be acceptable to teach only by lecture or only by sterile cases. It is going to be a world of course modules and team-teaching involving practitioners in a meaningful way. Practitioners and professors will be linked in creative and exciting ways both in the classroom and through advanced communications technology. 

In many leading programs, practitioners are beginning to teach alongside theorists; that makes for better courses. Universities are using more clinical faculty in their leading programs. Clinical faculty members are practitioners who take students into a "clinic" and show them the details of their organizations, but they also provide balance with theory. 

Business schools have always used practitioners. They typically hired adjunct faculty to teach at night; but I am talking about involving these executives in core courses, a much deeper involvement. 

I remember well the days when business schools were called training schools, so I will close by noting that I am not talking about ignoring the value of good theory or the value of having students step back from the messy real world to think deeply about creative solutions and ways to implement them. I think that we are beyond the trade school stigma today, and it is very important that we produce students with some form of hands-on experience. The laboratory is really not limited to the campus anymore. It has become the business community. I would encourage all of you to set up relationships and alliances with the business community. They are important.