Morgan Stanley Private Wealth Management
In October of 1987, I was a second-year MA (RSEA – China) student and my thesis advisor, Professor Dwight Perkins (Economics) gave me some advice early on. During the spring, when I outlined my thesis topic -- CITIC and Capital Markets in China -- to Professor Perkins, he said he knew little about Chinese capital markets and finance as he was an agricultural economist, therefore: “You should go over to the Business School in the Fall and take a few finance courses which will help solidify your analysis of the nascent Chinese capital markets.” Not knowing a thing about HBS, I said ok, and enrolled in a few business courses. In those days, as long as you were a graduate student at the University, you could take classes at HBS, HLS, etc. The first class I took at HBS was called “Capital Markets”. Not only did I learn how to use a HP 12 calculator, but I learned that many business school students were leveraged and highly sensitive to the stock market. How did I learn that? As a poor graduate student surviving on loans and part-time jobs, I had no cash to invest in stocks, so the market was a foreign entity to me.
It was Monday, October 19, 1987 in one of those big semi-circular classrooms at HBS. Approximately halfway through the class someone handed the professor a slip of paper. He stopped the case study and made an announcement. “The stock market has just crashed and the Dow is down over 500 points. All of you who may have margin calls are excused from class.”
I was sitting in the front row and was amazed that almost half the class walked out. What just happened? Well, obviously there were some students with leveraged long positions, or were they all rushing out to call their brokers to place buy orders. I think the former is more likely. Whatever the case, I was dumbstruck that so many young people had money and were involved in the stock market. I certainly had no idea what a “margin call” was in 1987.
That moment was formative in my education and helped me understand risk, first in China’s capital markets then elsewhere. Perhaps the events of that day taught me more than the whole class. Maybe that’s why I am in finance today.
I still have my HP 12c as a reminder of capital markets at HBS and October 19, 1987.