Financial Reforms and the Millenium Bridge

12 11 2009

The lecture given by Professor Sapra about the counterproductive aspects of some of the accouting measures US legislators are considering in order to strengthen the financial sector has been one of the best I have ever had in my whole life.

According to Professor Sapra:

  • Increasing the reporting frequency is an incentive for managers to focus in the short-term and neglect long-run growth, which is bad for the economy
  • Using fair market values in finacial statements will increase volatility in financial reports, companies will react more to the actions of other companies than to the fair value of fundamentals.
    • Analogy: The Millenium Bridge in London was built in with a special suspension design that allowed the bridge to react to vibrations, like the steps of people. The problem was that people tend to walk at the same pace, especially if there are many people and the bridge is vibrating. As a result of people moving at the same time, the bridge enters oscillates too much. The Millenium Bridge was closed for 18 months after its opening to change the suspension system.

    The comparison with the Millenium Bridge Professor Sapra made, together with the clarity of his explanations and his sense of humor, made this lecture so great and memorable.



    One response

    20 11 2009
    Fridays From The Frontline » Clear Admit: MBA Admissions Consultants Blog

    [...] video for the Kellogg Marketing Competition. Chicago Booth ‘11 GlobThink thought that a recent lecture by Professor Sapra was one of the best he ever attended. Kellogg ‘11 Shobhit found that, once in b-school, rankings were not as central to the [...]

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