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The Sub-prime Crisis - An evolving MBA experience
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1st Apr, 2009 | Source : Dr. Wolfgang Amann, Executive Director, The St.Gallen MBA

Looking into the recent number and intensity of crises, some past-present asynchronies can easily be recognized. Never before was it so easy for a crisis in one country or market of the developed world to so severely impact the world in total. The subprime crisis is yet another example. As Swiss banks jumped on the bank wagon of loans for real estate in America, they should have known that something may have been wrong with the observed growth rates - they were too good to be true. Author Nassim Nicholas Taleb refers to such events as black swans in his seminal book with the same name. A black swan is defined as an event with three characteristics. First, it was originally deemed to be unlikely. Second, if it actually happened, it would have major repercussions. Third, afterwards everybody admits that one could have seen it coming.

The basics of economics and investment prescribe rather to invest acyclically and as a latecomer in the life cycle of the growth bubble, however, the time for attractive returns on investments was too limited. The bubble burst too soon. Top managers and shareholders of Swiss banks are paying the price now. All managers have to understand that if such crises occur in such an interconnected system of economies, you can run, but you cannot hide. Investment experts predict now that the sub-prime crisis was actually just the beginning. There will be a ripple effect. Car loans and credit cards laden with bad debt are next fields where the credit crunch will be felt.

How does this impact the job market in banking and finance in general and for MBA students in specific? The healthy fundamentals will allow banks to swallow this bitter pill. But undoubtedly, current growth opportunities have vanished. Those managers and financial experts especially who cannot cope with the changing reality of an interconnected world full of black swans will feel the harsh wind of change blowing in their face. Greater connectivity and the sheer velocity of global integration has increased the number of relationships and vastly swollen the amount of information available. On the other hand, it has done nothing to give managers more time to interpret the information and manage the demands. This raises the bar for success in one's future working environment to new heights. MBA graduates from the top schools represent an attractive pool to recruit from as they have been trained for times of constant crises, global interdependence and higher bars for success. As a postgraduate degree, financial service institutions benefit espeically from their previous work experience AND latest training. The St.Gallen MBA, for example, can easily be compared to the boot camp of marines with the only difference being that their training is not hard in the physical sense, but mentally. Their absorptive capacity and mental bandwidth have been increased through an education which prepares them for more turbulent times. As with many other top schools, lessons drawn from the latest crises has become an essential part of regular classes.

Dr. Wolfgang Amann, Executive Director, The St.Gallen MBA



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