00:00:00
Jeremy it is such a delight to be here with you this morning and I want to just thank
00:00:13
you for taking some time to contribute to our what I've learned Series so you
00:00:18
may know that we started this a couple of years ago to highlight and capture the legacy of some of our most esteemed
00:00:25
faculty members so the first person we did was Anita Summers you are now our second guest and I'm excited for our
00:00:32
conversation why am I honored to be your guest on this show thank you Erica thank you so
00:00:38
let's let's dive in and for the benefit of our audience I'd love to just have
00:00:43
you walk us through the beginning how did you come to this point in your life where you are so
00:00:50
regarded and respected as sort of the world's economist wow of course it's the the beginning of
00:00:58
the beginning um you know I my mother always stressed the importance of Education to me
00:01:08
um both my both my parents went to college I grew up in Chicago area actually um and uh they really thought that you
00:01:18
know getting ahead was is very important on education and that was that was what
00:01:22
was was stressed um I was uh good in math um uh I was I was interested in the stock market but interestingly from a
00:01:34
different point of view than many of the others I was interested in what made the
00:01:38
market go up and down more than let me pick a stock that I'm going to make a
00:01:42
killing on and and do well and uh back in high school it's so so very different
00:01:49
today back in high school uh even at the best in in the country there was no economics classes that was considered a
00:01:57
college only class and in fact interestingly enough not even a freshman class you're when I went to Columbia as
00:02:06
my undergraduate it was uh the first time you could take it was a sophomore year I didn't take it until my junior
00:02:12
year um uh but uh I I after two weeks I knew I wanted to be I wanted to be an economist I always knew I wanted to be a
00:02:23
teacher so I found my subject um and it was just a matter of trying to get into the best place I could so you
00:02:31
always knew you wanted to be a teacher where did that interest go I always you know when I was even really small
00:02:38
like and uh uh high school and even even before high school I loved to tutor kids
00:02:44
I mean if they were having trouble with their math or they're in trouble with
00:02:48
chemistry or whatever else and I remember I was five hours an hour and I will tutor you for an hour to help you
00:02:55
before a test and I I love doing it I love trying to explain and and um uh get to get that response
00:03:07
um and I like being up before I was never afraid to be up before crowds and um I remember one of my classes in high
00:03:16
school was called speech and I don't know if they have that anymore when I was in high school they did okay
00:03:24
um and everyone else was like oh my God I have to get up before the class um I got up my my topic was what caused
00:03:32
the stock market crash of 1929. as I read gabri yeah I read some some of the books about the the stock market
00:03:40
crash I was interested and I loved giving it I mean you know and and uh you know I had a few charts and everything
00:03:47
like that and I've I've always enjoyed lecturing and I've always enjoyed
00:03:51
explaining uh different problems to people all right so Columbia for undergraduate
00:03:58
MIT foreign MIT for graduate school yes um if you were good in math and good in economics you want to go to graduate
00:04:07
school MIT was actually the place and I was so honored I got a call from Paul Samuelson
00:04:14
um I was in my dormitory in senior year and I applied to a number of schools and
00:04:18
I I got into MIT but I didn't respond right away because it was other good schools and he I remember I remember Sam
00:04:24
Houston saying to me he said Jeremy I I did this is Paul Simon he said you know we sent out the invitation two weeks ago
00:04:33
and you haven't said yes yet so we're wondering is there something wrong with
00:04:36
us at MIT I said oh no I just sort of delayed I'll get my app okay okay that's
00:04:41
good we would like to see you there so I went to MIT I loved it there at MIT um spent four years I did one year post
00:04:50
doc at Harvard um actually under Marty feldstein it was the chairman of council economic advisor
00:04:58
subsequently and my first teaching position was The Graduate School of Business at the University of Chicago
00:05:04
where I spent four years 72 to 76 until I came to Wharton so you've been at Wharton since 1976.
00:05:14
almost 50 years almost half century it's almost unbelievable so I'd love to as someone who is
00:05:22
relatively new to warts and I've only been here for three years what was it like then and how have you seen the
00:05:28
school evolve in that period of time so many changes of course it was only Dietrich call back then when we were
00:05:36
talking about the Wharton School and that uh what I guess was built in the 50s um so I was already aged
00:05:44
um and it was a pretty old but we had tiny little offices I remember um and we had classrooms that were all
00:05:54
about 42 with fixed desks it's nothing like what we you know what we what we
00:06:00
have uh today um uh but uh outside of that um now it is important I think about two
00:06:09
years I came in 76 two years before I came economics and political science used to be in the Wharton School
00:06:17
and then they did what many other liberal arts economics and political science they
00:06:24
moved out into the liberal arts okay school so it was it was you know it was more controversy we had a good economics
00:06:32
division um and particularly macroeconomics is what I was was interested in my PhD
00:06:39
actually uh Erica was was not people say did you get a PhD in finance and the answer is no I got a PhD
00:06:48
and I think this is interesting I got a PhD in economics um monetary theory in Palestine they
00:06:54
said why didn't you go to finance I said when I went for my PhD in 1967 Finance was hardly a subject I mean all
00:07:04
of the great theorems and capitalize the pricing model Black Shoals theorem and all that really got developed
00:07:09
subsequently so people told me if you're interested sort of in the stock market
00:07:13
go in economics at that particular time and really the field of Finance blew up why I was doing that into now if
00:07:25
it was if I were 10 years younger I'd probably back on my PhD in in finance and not equal but I never regretted
00:07:35
the macro because I think that gave me a really important perspective that I don't think sometimes people who just do
00:07:45
their major in finance or get a PhD in finance sometimes have so then you were here to see the
00:07:52
evolution of the Wharton School become this Behemoth and have this tremendous Legacy in finance but the root of that
00:08:00
what I hear you saying it was really in economics for me it was in it was an economics and they needed economists
00:08:06
because we you know we required macroeconomics as a course and actually in in the first few years they were very
00:08:13
integrated with economics Department even though they left the Wharton School they taught some of our students I
00:08:18
taught you know I taught a number of their students so there was a there was a a big uh big uh difference of course
00:08:25
as you all know it used to be called the Wharton School of finance and commerce and
00:08:33
um of course then it got dropped because it became so much broader I mean you know I mean it has grown
00:08:39
enormously it and and in Prestige um uh this I would probably you know say we were having Wharton was
00:08:49
having a hard time breaking into the Harvard uh you know Stanford Chicago grouping there we were right below it
00:08:57
um but then as we came and particularly under the the dean ship of Russ Palmer who was
00:09:05
um came when I was here uh you know really up the push for excellence that brought
00:09:12
us right up into the that top grouping yeah well we have you and your colleagues from the time to thank for
00:09:19
for that for sure thank you so as you have reflected on your life as an economist and as you on your life as a
00:09:25
Wharton faculty School Professor how would you describe your greatest achievement or accomplishment in the
00:09:32
field of economics wow I mean I would say the most influential work that I ever did was the
00:09:42
book stocks for the long run um and actually it was very interesting that that really came out of a project I
00:09:51
was doing with the late professor Marshall bloom was one of our most prominent professors
00:09:57
uh he actually called me up and said Jeremy the New York Stock Exchange is having a 200th anniversary they want us
00:10:03
to do some history I know you're interested in the stock market I said I'll take the dad apart I went all the
00:10:09
way back to beginning in 19th century look looking at data I wrote a number of academic articles to be gotten in
00:10:15
journals um and came to some conclusions and then a lot of my colleagues began to say
00:10:21
Jeremy you could you could turn that into a book and I said you know maybe I will turn that into a book and I I I I
00:10:31
turned it into a book um writing in the late uh 1980s uh got the book out in the early 90s it finally
00:10:42
hit publication May of 94 the first edition and the reviews were just really really pretty spectacular and it sort of
00:10:52
took off for there we have I just finished the sixth edition of that book we've sold you don't not almost a half a
00:11:01
million copies through through these 30 years of that book not as much as a burton mock Hills random walk uh uh down
00:11:10
Wall Street but um who I which the person and the book I admire in fact I think a lot of times I
00:11:17
said I'm writing that book because I wanted a book to read for students to read after they read that famous book on
00:11:24
on one I think his results a couple of million but I'm uh I I've it's really
00:11:29
had an influence and um I've given talks around the world on topics related to what is in the book
00:11:38
and how it relates to the current events well I want to stick with that topic of
00:11:43
the book stocks for the long run when you wrote it you argued that long-term investments in stocks were better than
00:11:52
say gold or bonds do you still think that that's the case and and tell us more how your thinking may have evolved
00:11:59
or why it hasn't evolved well you know what your what you said is absolutely
00:12:03
right but the the a lot of people had thought that would be the case and that was confirmed what what I I went a
00:12:12
little further and showed that over periods of 20 30 years often 10 and 20 30 years but to go he wants 20 and 30
00:12:21
years not only did stocks give you a higher return but they were less volatile now we now all know
00:12:29
how volatile stocks are in the short run um but in the long run a lot of the ups
00:12:36
and downs even out and they become more stable as long-term Investments and I think that really was what caught so
00:12:45
many people by surprising me so if I don't get panicked at the ups and downs
00:12:51
of the short-term market and keep it in I actually have a better chance of realizing higher reaches higher Returns
00:12:59
on Lower volatility it's like having your cake and eat it too right this that
00:13:03
was really what resonated is it still going to be true yes I don't know I'm
00:13:09
projecting returns in the future on stocks a little bit lower than my historical levels and we can we can talk
00:13:15
about that if you want but um uh still far above bonds gold uh you know the dollar and any other broad investment
00:13:25
class so economics as you know is a social science my field is in Psychology and other social
00:13:33
science and I think the two are very similar because it really is understanding human behavior so as you
00:13:39
think about and work with your students or when you are featured on CNBC and you're talking with people how do you
00:13:48
capture the psychology associated with Investments and making decisions connected to the stock market
00:13:56
I think psychology is hugely important my very good friend Bob shower um who from from Yale University really
00:14:08
almost pioneered what's called behavioral Finance which shows you that it's not just you know the analytics but
00:14:18
also the psychology that causes people and a lot of people to make investment mistakes and I recognize that and that's
00:14:26
why you have this short term about people get over pessimistic in this short run when things go bad and they
00:14:33
get over optimistic uh you know in the short run when things go good and then it and then it reverses so
00:14:41
you have the short-term momentum but um I I think it was actually Warren Buffett
00:14:46
which who who said yeah in the short run the stock market is a voting machine but
00:14:52
in the long run it is a weighing machine meaning the fundamentals will come out you won't be able to hide in the long
00:15:00
run I try to stick really focused on those fundamentals and try I think I do my best when I give lectures in Bear
00:15:09
markets to keep people calm and in the market and a lot of people have thanked me they said you know I was ready to get
00:15:16
out I was so upset I heard you and I stayed in and I'm very pleased that I did
00:15:22
well let's let's pick up on that theme so in my own background I studied crises
00:15:30
right I know that and when I started as dean of the Wharton School it was the first few months of the pandemic which
00:15:36
was a very significant crisis at the world faced and thinking about my role and responsibility as a leader to help
00:15:44
navigate Wharton through that period of time you are sort of the go-to person when it comes to thinking about the
00:15:53
stocks and and the stock market has been volatile as you've indicated and there
00:15:57
have been times when we have experienced crises in that regard how do you help navigate people through those so I want
00:16:04
to just pick up on what you were describing yeah and that and that covet crisis actually caused the fastest bear
00:16:09
Market in history actually I mean you know it came on so suddenly we all remember you know the middle of March in
00:16:16
the next three weeks it was the strongest sharpest I I've I was on many times on CNBC I said you know pandemics
00:16:27
come to an end you know we looked at the Spanish flu and uh this is definitely going to be a shock and I even talked
00:16:33
about if there's a year that people don't get have earnings uh that if you take a look at stocks Now
00:16:41
Stocks are long-lived assets they're infinitely lift so even one year or even
00:16:47
two year of poor earnings as long as we rebound should not tank the market anywhere near
00:16:56
the 30 percent that happened I I you know I said I don't know how far it's
00:17:00
going to go because you're right that psychology was I said but long term we're we're going to solve that we're
00:17:05
going to get a vaccine I was very optimistic that we were going to develop a vaccine I said two years from now
00:17:12
we're going to be largely back to normal so you know if you do the math two years
00:17:17
even of poor earnings um we did go through a recession that was even short it was a short one it was even not as
00:17:24
bad as even I had feared I said looking beyond that um and plugging that into all valuation
00:17:33
formulas you're going to get great returns if you buy right now even though things look look Bleak they definitely
00:17:41
looked Bleak for a while but I think it's so ironic or interesting that your
00:17:46
optimism and US finding a vaccine actually as you know the MRNA technology was here
00:17:55
the University of Pennsylvania uh yeah I was I was I was following it very very closely and you know I mean um I mean to
00:18:04
be out you know we to get back I know some of the doctors were vaccinated in December of that year but I I uh many of
00:18:11
us especially older people got vaccinated in January and February you're talking about less than a year
00:18:19
um into that and um uh you know saved millions of lives to say the least one of the things that is a topic of
00:18:30
conversation it has been pretty people have been very vocal about this recently and that is the sort of
00:18:39
increasing wage Gap and income inequality that wealth Gap that exists between people within this country and
00:18:47
certainly around the world what do you identify as some of the root causes for that kind of extreme inequality that
00:18:56
we're seeing I think what's most important um and people could talk about the Gap I
00:19:02
think what I would love is the people at the bottom in the middle to go up you know I'm not going to begrudge the
00:19:11
billionaires the billionaires um yeah some of them made incredible contribution what's important
00:19:17
is that we bring the people at the bottom up that we give them the the opportunities
00:19:25
that we have an educational system at the lower lesson at the higher level important is the Pinnacle I mean I mean
00:19:32
I was privileged I came from as I said at the beginning you know my mom education was everything and I know a
00:19:38
lot of these kids they may be smart and they go back home and the education is not important to the kids they've got to
00:19:45
be an environment that they can flourish and you know both before school and after school and during school and
00:19:53
be among peers that feel the way that they do in terms of of it's worthwhile to gain the knowledge
00:20:00
because I think there are opportunities out there known as a prognosticator of the future
00:20:08
they call me a guru and I tell people there are no gurus really he may be the exception to that but if we stick with
00:20:17
around the wealth Gap what happens in this country if we don't find ways to eventually close that wealth Gap or in
00:20:25
your words bring the bottom up what's the long-term prognosis prognosis is not good and I think that's
00:20:33
essential for any country to survive I think the U.S would lose status around the world I
00:20:39
mean you know I think back in the 60s I mean I you know I look at statistics uh I came from public high school a good
00:20:47
one in the suburbs of Chicago um and you know the public high schools were very highly regarded and the SAT
00:20:55
scores were very good and the achievement levels were good and an international scale the United States
00:21:01
was like in in the top ten now on these International things we're in the middle
00:21:07
or the bottom which is appalling um you know we are at the top in graduate education the and Wharton
00:21:17
and all the grad grad colleges is another problem but undergraduate education we're the top when you go down
00:21:24
to the primary and secondary schools that's where that's where we we are
00:21:28
falling down and have fallen down I think over the last half century and um that's where we have to bring
00:21:37
ourselves out you you can't have poorly educated um population and expect to get the opportunities and
00:21:47
be the the type of um country that you want to be yeah I agree with you as someone who has been teaching
00:21:56
economics for nearly 50 years how do you keep your teaching your ideas your curricula fresh and Innovative for
00:22:06
students because you know the field has changed pretty dramatically and how do you how do you
00:22:13
remain relevant and Innovative in the content that you're sharing well I think
00:22:18
that this is what I think was very unique about my classes and worked out very well
00:22:26
um a few years after I came here I only taught I started out teaching only the undergraduates and the PhD students not
00:22:35
mbas and the chairman of my department brought me in and said um you know Jeremy I want to talk to you
00:22:45
I've heard that you've been teaching some classes JP Morgan the Morgan Finance program and you've been mixing
00:22:51
Market information in with real serious material on all breath we're not I'll be
00:22:57
honest with you our mbas don't don't like our macro class they think it's too
00:23:03
theoretical it doesn't match it would you think about developing a class where you mix what's going on in the
00:23:13
financial markets in with macro I said I'd love to that's what I that's what
00:23:17
I'd love to do and I worked on developing that class the first 20 to 30 minutes of every class I go through
00:23:25
what's going on in the markets stock market up and down dollar up and down bonds up or down interest rates why
00:23:32
is that happen how does that mesh with what we're does that correspond to the model that I'm
00:23:40
building for you in terms of of trying to understand the interconnections between all these important variables
00:23:47
and that caught on that became that you know all of a sudden the ratings were really great for for macro
00:23:56
um um and my class is expanded from 40 and when Steinberg came in to donate money
00:24:03
to make Senator Dietrich what we what we know today and it was 150 in the classroom that became and that filled up
00:24:10
I once had to teach in g06 which was uh how many people 350 largest class from 350. one person said Jeremy someday
00:24:19
you'll have to teach in Franklin Field and I said well I think that's too many
00:24:25
but um uh that that's what mixing in the current events with the theory you're teaching so they
00:24:36
don't seem disconnected is is really what gives the people the motivation and as you probably had had
00:24:46
heard um I used to allow students a lot of people said doctor said I'm not here I talked
00:24:52
to class last year I I'm not taking this year but could I sit in on the first 20
00:24:56
minutes of your class and I said if you stand quietly in the back and then I had a group of people
00:25:03
they but they were quiet and they were really good and serious um and I would allow them in now now
00:25:08
that we have the internet and you know the fact that it's filmed they don't
00:25:12
have to come to the class the way they did let's say in the uh in the in the
00:25:17
1990s and and after what happened but uh I used to have uh you know maybe up to 50 60 come in for those first 20 minutes
00:25:24
which was called the market review market review by Siegel and um uh you know many of them you know
00:25:32
that were really interested in financials to do that but again what made it a success was combining the
00:25:38
theory with the practice the with combining an explanation of the markets because out before that you know macro
00:25:45
was just a lot of the people that developed macro years ago really weren't interested in the stock market financial
00:25:51
markets they thought it was very separate and I said no they're connected and I'm going to try to show you what
00:25:58
those connections desire well there have been generations of students who have benefited from your bringing together
00:26:04
the markets with the theory so thank you for for that let's stay with our students for a
00:26:11
minute again you've been at the Wharton School for a long time you've seen
00:26:16
students come and go how do you describe the student of today versus the student
00:26:22
of maybe 30 or 40 years ago what's different about that well you know in a way I'm the one students I think have
00:26:29
kept on getting better and better um and and and that I I get a lot of I mean I have colleagues at other
00:26:36
universities who say oh aren't the students getting worse and I said well I do hear that from other places but it's
00:26:43
not true for not true of my students for for work now where were the challenges come
00:26:51
um I think is is in the MBA system it's it this is what changed the most now
00:26:57
remember I taught my first four years at The Graduate School of Business University of Chicago we were we took
00:27:02
the youngest of all well actually the average person was out from college only two years
00:27:08
believe it or not and and we took a big contingent that just got their ba degree
00:27:14
and went right to The Graduate School of Business so they were very very interested now as time has gone on at
00:27:19
all schools as you know the age has gotten higher and higher now as the age gets higher these people have families
00:27:27
they have you know professions they get farther away from oh God do I you know I thought I left
00:27:37
final exams right eight years ago so um I think to some of them um it's it becomes more challenging than
00:27:46
it was earlier when they were closer to the undergraduates to do the same type of rigorous work although Wharton is so
00:27:53
selective we still get the best and are able to do that but what I hear at other
00:27:59
schools is that's not happening um as much so that is changing because I think of the increase in the average age
00:28:06
of the in the mbas the PhD students are still you know very serious and as I said the it seems as the word in
00:28:13
undergraduates just get better and better I mean I've I've been honored because the last uh well I've always
00:28:20
taught an honors class and I always said wow and the the honors students of Wharton are
00:28:27
the best in the world our undergraduates are absolutely incredible without question for sure
00:28:34
would you so as a Dean I'm constantly thinking about how to position the school for ongoing and continued success
00:28:42
and the curriculum is a part of that portfolio are there things you would advise me in terms of how we should be
00:28:50
thinking about the the curricula and what's relevant what content what topic
00:28:54
should we be well I mean look at how much is new now look at ESG and which was total you know came out of nowhere
00:29:02
um uh in my in fact in the sixth edition my book I have old chapter on ESG it wasn't before in the sixth edition of
00:29:09
the book I whole part on cryptocurrencies uh which was never before um I think the Departments have taken
00:29:17
the lead and many of them gotten the courses let's get slower to be added into textbooks and and the more
00:29:23
traditional things because you're used to doing that but you know someone that
00:29:28
that's you know you got to know where you know where are the research topics
00:29:32
going they're always changing um pro and con you know there's a lot of controversy about ESG investing but
00:29:39
there's a lot of really good analytical work that's been done on that free of
00:29:43
some the politics that that often surround uh that that issue so yeah I mean you always have to be aware and I
00:29:54
think Morton has been good at being at you know at introducing new topics that you know others are talking about uh
00:30:04
early on so um you know it's important to continue that trend so artificial intelligence is one of
00:30:12
those new buzzwords shall we say about that and yeah what role might that play that exploded into the marketplace
00:30:24
right now um uh I'm I'm I myself you know I've been thinking about it I'm getting you know
00:30:35
all the manifestations of it now again it it's I I I I think two things first
00:30:42
of all check GPT obviously number one but uh you know very recently uh you know one of the biggest uh you know chip
00:30:51
designers Nvidia that came out with explosive earnings so this sparked Wall Street I mean you know okay you can talk
00:30:57
about all these Innovations but do they make money oh well this chip May Burma now the thing is you got it that's stage
00:31:05
one you know it's it's often like uh you know they're providing nuts and bolts
00:31:10
but those people are paying for this have to be able to charge more for in other words they have to provide a
00:31:16
service in above that I'll pay oh I'll up my pay because I'm going to get that
00:31:22
much better service for what I need that's that's more challenging I mean
00:31:26
and now everyone says I want to chips I want the best chips so Nvidia is going to do star now we well the next thing is
00:31:32
how much more can I charge for those chips and more about competition and all the rest
00:31:37
um it reminds me you know in a way but Adam and not the crazy level but in a way very much at the the beginning of
00:31:45
the internet of 1998-99 when you know ever yeah everyone the internet was going to change the
00:31:52
world and anyone had a.com at the end of their name uh you know you know went to
00:31:57
a thousand times uh earnings or or non-earnings uh nobody's a profitable company so we're
00:32:06
not this is not some people are saying this is nowhere near the craziness I went I was here during the craziness so
00:32:12
I remember it um so this is much more solidly that doesn't mean these things can't get over
00:32:18
valued they often do whenever you know new things come there over excitement you know when that pace will be is is
00:32:26
another thing but there it this is these are the sort of things um that happen and push the world
00:32:34
forward um uh yeah yeah AI has challenges um I think it could be used for teaching
00:32:43
um I Heard a one Professor who said that his classroom got much better because he used Chachi BT to do answer questions
00:32:52
and then ask the students to say what was wrong with the answer that chat gbd did and that was challenging for them
00:33:01
because they had to look for the right answers um and uh you know so in a way you have
00:33:08
to be really careful it can do a lot of a lot of things but when it has to be really precise
00:33:17
um you know sort of like autonomous driving I mean you don't want to be 98 right yeah
00:33:25
chat gbt is I don't even know if it's I don't even think it's 98 right
00:33:32
so I mean it it gathers a lot of information and and summarizes very very quickly that's already on the web we
00:33:39
know there's a lot of bad informational level as well as good it does some job
00:33:42
at curating that not a lot but these are you know the challenges that uh you know
00:33:48
any new technology is going to have to face in the future yeah well I tell you Professor Siegel the
00:33:57
impact that you have had not only at the Wharton School but certainly at the warden school but the impact that you've
00:34:03
had in the world with your great mind your ability to communicate your ideas your passion for your subject matter
00:34:10
really we are better for having known you and interacted with you and had the privilege of working with you so thank
00:34:18
you so much for for spending time and you know I want to thank you know Wharton for allowing me to to use my
00:34:25
talents as effectively I mean I it was the best place for me to be without question and I really
00:34:33
cherish those years thank you thank you [Music]