Welcome to professors’ picks, offering a curated selection of FT articles by and for business school faculty to connect classrooms to current events and develop students’ critical thinking.
We welcome contributions aligned to traditional business school topics and broader interdisciplinary themes. Get in touch at [email protected] and share your suggestions.
Contributions this week from Tom Davis, Clinical Assistant Professor, Joseph M. Katz Graduate School of Business, University of Pittsburgh.
Managing Risk and Uncertainty
“Wall Street’s AI ‘bubble’ echoes dotcom excesses, Ray Dalio warns”
Tags: AI, technology, stock market, US, China, export restrictions
Summary: Billionaire investor Ray Dalio cautioned that the surge in US AI stock valuations resembles the dotcom bubble of the late 1990s, fuelled by exuberance over transformative technology but vulnerable to correction. He highlighted high pricing combined with interest rate risks as factors that could “prick the bubble.” Dalio emphasised that while AI will change the world, many conflate technological success with financial success — and profitable investments. With rising US-China tech competition, state-backed initiatives and heavy investments in AI underline its critical role in economic and military supremacy.
Classroom Application: This article provides a platform for faculty and students to analyse what constitutes a stock market bubble, how financial success is not adequate to drive technological success in some cases, and governments’ differing approaches to supporting technologies critical to economic and military supremacy.
Questions:
-
Why might Ray Dalio’s view of this issue be of particular interest?
-
What other stock market “bubbles” have occurred between the dotcom bubble of the late 1990s and today? What were the drivers that led to those other bubbles — and to their bursting?
-
What other industries important to both economic and military supremacy have been supported differently by the US and other governments?
-
What are the risks associated with an increasingly, “industrial-complex- type of policy in which there is . . . government-mandated and government-influenced activity”? And what are the risks of eschewing that approach?
Ethics
McKinsey considers sale of in-house asset manager after years of controversy
Tags: Business ethics, management consulting, asset management, private equity, SEC
Summary: McKinsey is considering spinning off its $23bn asset manager MIO Partners after past conflict-of-interest concerns and a $18mn SEC fine that led to governance reforms. MIO now focuses on macro trading rather than individual stocks or bonds of any public or private company; however, questions persist about the relationship between McKinsey and MIO Partners. A strategic review aims to explore alternative ownership structures while ensuring alignment with McKinsey’s long-term interests.
Classroom Application: This article provides a platform for faculty and students to explore the ethical implications of consulting firms owning adjacent financial businesses.
Questions:
-
What is McKinsey’s core business?
-
What generates the conflict of interest that has led to controversy over the years and the SEC fine in 2021?
-
From an ethics perspective, how is conflict of interest a question of deontology (“means”) vs consequentialism (“ends”)?
-
How have the “big four” accounting firms managed conflicts of interest related to their attendant consultancy divisions?
-
What is similar/different in those structures relative to the one between McKinsey and MIO Partners?
Got feedback on professors’ picks or willing to contribute? Get in touch at [email protected] or add your selected articles and questions in the comments below.
Read the full article here