Person of the Month

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"Knowledge is key to succeeding in the digital age."

Francesco Franzoni Bild Aug 2018

Francesco Franzoni
Professor, Swiss Finance Institute

Francesco Franzoni is SFI Professor of Finance at the Università della Svizzera italiana. He joined SFI in 2007 and has held an SFI Senior Chair since 2012. Professor Franzoni obtained his PhD in Economics from the Massachusetts Institute of Technology. Professor Franzoni’s research has been published in the top finance journals worldwide and has appeared in the international press. He is a regular speaker at leading academic conferences in finance. He argues, that Knowledge is key to succeeding in the digital age.

 

Francesco Franzoni, what is success to you?

As a researcher, I define success in my profession as making useful contributions to the advancement of knowledge. In the field finance, a relatively young field of study, we have made tremendous progress in understanding how markets and institutions function. We also have a good grasp about what constitutes sensible investment behavior for single individuals as well as for institutional investors. I believe we have achieved a good understanding of the determinants of financial crises, including the most recent one. We still need to improve our ability of predicting the next crisis and defining policies to prevent it. In my research, I try to be aware of this concern and aim to highlight elements of dysfunctionality in the current structure of financial markets that could challenge financial stability.

What was the best decision in your professional career?

I consider joining the Swiss Finance Institute at USI Lugano my most successful decision. The thriving research environment that SFI provides and the friendly working atmosphere in Lugano gave a major boost to my productivity. Not to mention the quality of life that Switzerland and Ticino can offer.

What drives you?

My strongest driver is thirst for knowledge. I guess that is what helps a researcher withstand the lack of certainty in the outcome of your daily efforts. Progress in my profession comes in bursts. There are long periods of time when nothing happens and one just has to keep trying, looking in different directions, and keeping an open and positive attitude.

On what values are your daily actions, decisions, plans based?

As a researcher in finance, one could easily lose sight of the value of research for the society at large. Finance is often considered as the science that studies ways to make money. Indeed, at a first approximation, we study investors that try to maximize their monetary returns. However, I constantly make an effort to eviscerate the implications of my work for the general progress of society, at least in the domain of economic policy. In the end, university research is financed to a large extent by taxpayer money. Hence, I see it as a moral obligation to keep present in my mind the necessity to find a connection between my research and the collective needs. In modern societies and in Switzerland in particular, finance plays a major role. Therefore, research in finance should serve the purpose of improving the functioning of the plumbing of our economies.

What do you enjoy most and least about your job?

The part I enjoy most is the start of a new research project. That is the time when new ideas are floating freely. It is a moment of great creativity and enthusiasm. The part I like least is the review process that a research article undergoes before publication. There are many concerns coming into play, e.g. personal preferences and career concerns of referees that make the process sometimes frustrating and not always ‘scientific’. Overall, competition among researchers is a desirable situation, because it makes all of us more productive. However, at times, competition can create perverse incentives that are hindering real progress in science.

What problems should politicians and authorities tackle quickly?

I assume that you mean in the domain of Economic policy, which in any case underlies many other aspects of public policy. I am a true believer in a market-based economy. However, markets require consensus, trust, and well-informed participants to function well. I think that the current levels of inequality that we observe both within our developed economies and across countries are undermining consensus and trust in markets. The democratic process, as we used to know it, is also challenged by the rising inequality. Ultimately, for the sake of our democracies and market economies, policy makers should strive to give fair access to the market to all individuals. This entails providing individuals with a sufficient level of education to understand the rules according to which markets function. Moreover, the schooling system should endow individuals with a human capital that allows them to adjust in a flexible way to the great changes that technology brings about. Finally, policy makers should develop policies to re-train and re-employ those who suffered from bad outcomes in the job market because of technological change.

Where do you find the balance in your free time?

Besides spending time with family and friends, I try to save time to practice sports. In the winter, my favorite sport is downhill skiing. During the rest of the year, I practice road cycling. Reading and cultural activities (movies, theater, and art exhibitions) are also important for m

What can't you live without?

It would be hard for me to be cut off from nature. I need to live in a place that gives me relatively easy access to mountains and to the countryside. Both environments are necessary for me to practice my hobbies. Moreover, I feel that nature has a soothing effect on the stress that normally accumulates during the week. Lugano is a great location in this regard. The best mountains in the world are within easy reach. The beautiful lake provides a convenient cycling circuit. Finally, for a taste of city life, Milan and Zurich are not too far away.

What would you recommend to a newcomer to asset management?

The buzzword nowadays is Fintech. Hence, I would recommend my students to learn some fundamentals of programming and to understand the workings of artificial intelligence. Our new master in Fintech at USI Lugano does exactly that. We give the next generation of finance professionals the tools to operate in the new technologies that will soon become dominant in asset management and the financial sector in general.

What book are you reading?

I am reading the book “The Half Has Never Been Told: Slavery and the Making of American Capitalism” by Edward Baptist. It is a fascinating recount of the role of slavery in contributing to the economic development of the United States. The standard narrative of slavery in the U.S. is that it was the expression of an archaic society, which had nothing to share with modern America. The author debunks this myth. The creation of the strongest economy in the world owes a lot to the exploitation of slavery. While tackling the economic description of this institution, the author does not shun a vivid portrait of the inhuman treatment of black people during this long and dark period of history.

What do you do during a short trip?

I read some research article or read a book. However, when I drive, I listen to podcasts. There are some very entertaining podcasts out there. For example, Radio Atlantic discusses current political or broadly-defined cultural issues, with a non-exclusive focus on the United States. The hosts are very entertaining. I also listen to EconoTalk with guests ranging from famous economists to authors of books in different domains. Also enjoyable, FreakEconomics Radio applies concepts from Economics to the most unthinkable domains…such as public restrooms.

What wallpaper do you have on your mobile phone?

I typically keep the background of my phone black, it helps to save energy and to prolong battery life. I really dislike when the battery runs out in the middle of the day. However, as wallpaper for whatsapp, I’m currently using a photo of my new skis. I bought them just before the end of the season. I used them once and I can’t wait for the next skiing season to use them again. I will not say the brand, but they are race-carvers for giant slalom…the color is yellow, with some white.