Season 2 Episode 1 Dean François Ortalo-Magné Edited Transcript

François Ortalo-Magné’s journey to his current position has been a remarkable one, marked by pivotal experiences and serendipitous moments. Prior to assuming his role at London Business School as the Dean, he held the prestigious position of Dean at the Wisconsin School of Business, University of Wisconsin, Madison. A testament to his remarkable fit for the position, the London Business School governors diligently sought out the perfect candidate and found in him the missing puzzle piece they were looking for.

Now, in his new role, François Ortalo-Magné brings with him a wealth of knowledge and experience, eager to lead and contribute to the growth of the institution. Despite the twists and turns in his journey, his passion for education and the pursuit of excellence remain unwavering.

Section 1: From Pyrenees farm to global academic leader

Chris: Thank you so much for inviting us into your wonderful home here on the Dean’s house at Regent’s Park. It’s a great honour and privilege that you could take the time to come and speak to us.

Dean: Our pleasure. Thank you.

Chris: Thank you. So if we could start by giving us a little bit of flavour of your journey so far. How did you end up sitting in this chair and speaking to us?

François Ortalo-Magné: The main part of my journey that got me here is I was the Dean at the Wisconsin School of Business at the University of Wisconsin, Madison. And credit to London Business School and these governors, they work with the Head until on being very specific about what they were looking for in their next leader; and then they went around the world asking, do you know someone with those attributes?

And apparently my name came up a few times. It’s a real privilege, I wish it to everybody to be hired into a job where, from what the employer tells you, you are the puzzle piece that matches the puzzle gap that they were looking for. 

Before that I was a Professor of Real Estate.

Chris: But of course, you weren’t a complete stranger to the London Business School?

François Ortalo-Magné: I had a visiting stint here, although it didn’t work exactly as planned. The idea was, I got a grant to do research, so no teaching. I thought, let’s get out of LSE and go to LBS, and I can spend my time there and do the research. And my wife and I thought we were really smart to plan to have a baby at the same time, and then we have twins with no family in town. So the truth is, I didn’t spend too much time in the office during that visiting stint. I spent a lot of time helping two wonderful children get started with their lives!

Chris: You mention your background was in land economics, and you came from originally from the Pyrenees. What is your connection with the land? Was that part of your rural background in the Pyrenees? Where did that passion come from, that you wanted to dedicate your academic career to?

François Ortalo-Magné: I don’t know that I know where it came from. Probably something to do with the fact that my grandfather was a farmer, and his whole family before him. My parents are both agricultural engineers. At the age of six I told them I wanted to be a farmer. But if you don’t inherit the farm – which didn’t go to my father, it went to my uncle; I went to Kansas and I found a wife, but she didn’t have a farm – or if you don’t marry in a farm, it’s really hard to be a farmer.

So I stayed in school and I did agricultural engineering, and then I did a PhD and then I became a Professor. At this point – my PhD – I thought, why don’t I some research relative to farming? So I worked on the farmland markets. But then when I graduated my PhD advisor told me: you’re passionate about this, but very few people in the world are. Did you notice that your research applies to housing, and a lot more people care about housing! So, if you want to have impact as a researcher, you might consider shifting your interest from farmland markets to housing. 

And he was right. The papers that came out of that still gets cited. It was a good advice. But yes, I really wanted to be a farmer.

Chris: The worlds of agriculture and housing both are very much impacted by climate these days. And going back to the Pyrenees, it has had 1.2 degrees of warming, which is significantly higher than other parts of the world.

François Ortalo-Magné: It’s actually awful what’s going on. There are predictions that say the glaciers will have disappeared by 2050; but one of the main glaciers where I like to go hiking, the highest French peak, that glacier has lost two meters of ice every year for the past 20 years. Except last year it lost four and a half meters. There’s only 35 meters left, so I don’t know that it will last until 2050. It is completely changing the mountain, and changing the whole ecosystem; particular this summer when the melt was more than twice the annual normal melt. It does become very alarming and it’s difficult to have any hope, actually, because it’s not like we’re going to start putting white covers over the glaciers in the in the summer. 

That’s why I appreciate the fact that, more and more, we are having conversations not just about climate change, but climate emergency. That can only help.

Section 2: ecosystems of curiosity and impact

Chris: Absolutely, the use of language is really very important. The movement from ‘global warming’ to ‘climate change’ was a very politically oriented move. I think moving it now to ‘climate emergency,’ people react differently and emotionally. I quite like the term ‘energy transition,’ because it’s something that is happening and you need to be a part of it.

Moving from Wisconsin, where you were noted for doing some really fantastic work and also transforming brands and launching a significant campaign, and then you come to the London Business School…There are some very big shoes to fill there! What brought you to want to take on that level of challenge? It’s one of the biggest seats in world academia.

François Ortalo-Magné: For me, if you look in terms of the prestige and the potential for impact, there are very few academic positions that can rival this one. So it starts from the foundation of why I wanted to become a leader in academia. I had a career myself as a teacher and as a researcher, but I remember wanting to be a farmer, and the farmer is not the one that pulls the corn from the ground or pushes the milk out of the cow. No, the farmer is the one who creates an environment where plants and animals can flourish. 

I saw academic leadership as an opportunity to fulfil that long-term dream; to be that farmer, to be the one who will create an environment for great faculty to do research, for great students to interact with one another and with the faculty, and for an alumni network to engage with their school. That’s why I first applied for the job at Wisconsin. And then the culture of LBS: I like the fact that LBS is a world-class research institution, where the researchers are passionate about their impact. 

I believe as a society we have drifted into a corner, and that’s a big issue for all of us. And maybe we are warming up to this problem: because we have dropped public funding into scientific and academic research, we are no longer creating an environment where a few select people who have proved themselves – the tenure process being a very long process – are given the right to curiously wonder at the frontiers of knowledge. 

To give you a concrete example, which is a big loss: if I look at the faculty who are relevant today to the climate debate, and you talk to some of our faculty here, it’s not because we once said, ‘it’s a climate emergency,’ that they started doing research on this issue. It is because years ago, before anyone thought this would become an emergency, they were asking themselves questions that today we know are relevant.

There is no Dean who could have told them 15 years ago, 20 years ago: you’ve got to start working on this! That would have never happened. What happened is they were trained and selected and they were incentivised to have impact. And somehow, they figured out that this stuff is moving.

To give you another concrete example, when I got to LBS I decided to reach to read one or two papers for every tenure or tenure track faculty member – 105 of them. And I found out that, unbeknownst to them, there were 17 who in the previous five years had published 46 papers related to questions of diversity and inclusion, across every one of our subject areas. In every domain; not just behaviour but also in economics and accounting. 

That would not have happened if someone had said: do this. It’s because they care about that impact that was somehow ahead. And I have yet to encounter, in my six years as a Dean, a real-world issue of the moment that doesn’t have someone who had been worrying about it for many years. And what I love about LBS is that we are trying to figure out a way to create an environment for this kind of curious wondering.

But with no public funding (or very little) and no big endowments, we have to be relevant. There has to be a thread from every one of the researchers to the teaching of our students and the teaching of executive education. That means that even amongst themselves – I don’t have to tell them –we need to create an environment with a lot of individual freedom for those researchers and their curious wondering. We have a real sense of collective responsibility. It is what I think is unique to LBS: somehow, over the years, we have assembled a group of people to whom we have given that freedom to be brilliant – but they realize that collectively they have to be impactful. That is why today we have so many researchers who are relevant to the issues of the day. Tomorrow: bring on the issue! I bet you there’ll be someone. 

That’s what I love I love at LBS. We create this platform, this curious wondering; and then we attract students from around the world; and then they go out and they amplify the impact of that research of ours. We attract amazing corporate clients; they go out and amplify the impact of that research. We are in a position to provide the content and the connections our alumni need for today and for their tomorrow.

Section 3: Transforming the school: ‘impact squared’ and Forever Forward

Chris: Since you’ve been Dean, you have been undertaking a strategy of transformation. Tell us about that. What’s your vision going forward? Where do we need to be to be going? 

François Ortalo-Magné: So first, if I can go back to ‘relaunching’ the brand: I would say maybe I ‘focused’ the brand. We love our diversity at LBS, and I think it had become a bit confusing. So we did this really interesting work leveraging our faculty and their research. Who is it that we have been? If we look at our archives, our history, and we ask ourselves, who really defines our brand? And pointing out to ourselves that there’s something special about our alumni. Because once an alum, forever an alum. I wear a lapel pin, but you might as well get a tattoo! Because it doesn’t change. So what is it that they tell us they are, and who is it they aspire to be?

This allowed us to focus on some well-known cornerstones of our brand: research; international diversity; and the fact that the programs are about having a profound impact. We’re not just here to give you knowledge, we’re here to help you get a new perspective on yourself and on the world.

The other element was that I wanted to meet the alumni community – they define the brand. So I went around the world in my first several months. We had this sentence in the school that, ‘we want to have a profound impact on the way the world does business.’ But as I was talking with alumni around the world I thought, no, wait a minute – this is too short. I’m hearing more. 

I don’t remember exactly when it happened, but at some point I’d been talking, spending a day with alumni. I was giving a speech at night and I said: we want to have a profound impact on the way the world does business, but also on the way business impacts the world.

It seemed to resonate. So the next speech I said it again, and this sentence took on a life of its own, because it actually captured that evolution of our community. Yes, we want to have an impact – and a profound impact – on the way the world does business, and on the way business impacts the world. So that relaunch was: be clear as to what is essential about who we are. Our identities are that research, that international diversity and then this profound impact that we offer. But then let’s be clear that this profound impact is impact on the way the world does business. 

I like to think about ‘impact squared’ –impact on the way business impacts the world. Impact on impact, impact squared. The French love math, right! So that’s how we started. Then we ask ourselves, on the strength of our history, given what’s happening in terms of competition, but also what we see our alumni need for their future – what’s the best thing we can do?

You know this – the world has changed. You’re contributing to this change. The world is no longer: I’m born, am educated, I work for the same company, and then I die. No, the world is changing around me. I need to continue to educate, to continue to find the connection I need for tomorrow. 

I know that WhatsApp is a fierce competitor! Our students come out with great WhatsApp groups and they tell me how active they are on these WhatsApp groups. But those are the connections they made when they were here. For all I know, once they moved to different city, different industry, there’s probably some people who, if not on their WhatsApp group then on someone else’s WhatsApp group, can be really important for them to understand who they are.

So that’s why we ask ourselves, can we not just think of education as a transaction? You pay tuition and then you get a diploma; but really education, and a degree in particular, is an onboarding into a community. And we remain relevant for you for ever after, because that’s the way the world is changing anyway. My vision is about trying to articulate who we are –that research, diversity, having a profound impact, impact squared – and what is the best way to serve that collective purpose that we have.

I saw an opportunity: let’s not just do transactions, but repeat engagement. And that’s why our vision stated we want to be an engaged community, walking a learning journey together. That’s what we are trying to achieve.

Chris: Which is a very nice transition onto the current campaign. Forever Forward is a very ambitious £200 million campaign you’ve recently launched. Could you tell us a little bit about what it’s all about?

François Ortalo-Magné: Firstly, I appreciate you calling it ambitious. There are days when I look at our US competition and it’s tough, because many of our competitors have endowments that are so big, they could shut down all operations and still fund themselves! So it’s important to realize that that’s the world in which we are.

It’s stunning that we are able to compete with them in many ways, and that says a lot about our people. And at the same time, I hope it’s an inspiration to do something great, building on our track record. 

It’s about accelerating the transformation, about that vision for an engaged community, walking the learning journey together. It starts with the makeup of the community. I would say Black Lives Matter was a big wakeup call for our school. We’ve prided ourselves for a long time – and rightly so – in the international diversity of our community. I love it when an American [business school individual] asks me, what’s the proportion of foreigners? They’re always going to lose because for us it is 91%.

But the fact that you asked me that statistic tells me you don’t understand. Because what’s fascinating at LBS is that if we gave a flag to everybody for the nationalities that are relevant to their lives, we would spend so much on flags! Because there’s so many people who have more than one country relevant to their lives. The competition doesn’t even understand the metric. So we’re very proud of that, and that is something to be celebrated and to be continued. 

But Black Lives Matter helped us realize that there’s some other dimension of diversity in which we must do better. We knew we had to push on gender. We knew that already. But with Black Lives Matter, we realized that from the point of view of ethnic and racial diversity – and also socioeconomic diversity – we were way behind in ways that were unacceptable. 

I would give credit to the black students at the time who stepped up, and not only called out the issue in a very visceral way that created a shift in the community, but also in being the first architect of the change. I’m delighted with the momentum that that we have now; it came out of that campaign. 

The number one priority from a financial perspective is doubling our scholarships because it’s with scholarships that we’re going to be able to eliminate barriers to entry to world-class business education. We have good momentum. We have demonstrated that we could identify candidates who are not in the pool; so our scholarships are not just going to fund the ones who are going to go to Wharton or Stanford anyway, but to identify other people. And at the same time, we have raised money for scholarships to help us fight the best schools in the world, so we can keep pushing for outstanding talent. And that is the number one priority, bringing outstanding talent with greater diversity into our school. 

A second priority that’s relevant, I think, to our whole community is around our innovation agenda. Moving to be in a position to walk the learning journey together with individuals, but also with corporates, requires a different infrastructure than we have had in the past. The ability to do predictive modelling so we can actually be ahead and say, this is what you could use right now. To remove the happenstance factor that, as a Dean, I happened to bump into someone in the pizza business in Australia, one in Canada, one in Saudi Arabia, and I’m going to make the connection…no. 

So innovation is about giving ourselves this infrastructure to have much more personalized content and at scale. Now, infrastructure is not just the digital world, it’s also the physical environment, and we really believe in London as our hub. Over the years we have developed a great presence in Dubai and we think that can be enriched, so that those can be places where people connect and collide and ideas change and perspectives are shifted.

And then the final priority is the foundation for all of this. We already started talking about it, and I appreciate how engaged our research is; We are not LBS if we are not relying on proper academic research and science, if we don’t understand the causality of things. And we won’t be LBS in ten years, if today we don’t create a space where world class researchers can do whatever they want, that curious wandering.

So those are the priorities. It’s scholarship; it’s innovation; it’s learning environment; and then it’s research.

Section 4: The power of diversity

Chris: The conversation on climate have evolved over time – not just talking about this series, but in general – to be taking on these much broader ideas of justice and diversity. So it’s fantastic to see that at the core of Forever Forward. What do you feel is brought into the classroom by having additional diversity? And then post classroom, going out into the world of leadership, how do you think that benefits the alumni of the future?

François Ortalo-Magné: I tell our students: don’t come if you’re not curious and open to be inspired to a different perspective on yourself in the world. And the way we deliver on this promise is at least as much your classmates as it is the faculty. The best the faculty can do is to create a framework and a space for exchange; the kind of exchange that’s going to make you realize that there is a different way of looking at the world than my way of looking at the world, and maybe that can be something I can learn and benefit from. That is fundamental to the kind of education that we want to deliver, that’s going to serve people here and serve them in the world, is to open them up to different perspectives. 

If you were to look at the school from a more macro perspective, you will see how our clubs evolve over time. I’ll give you a very concrete example. Once we opened ourselves to the fact that we were doing very poorly in terms of ethnic and racial diversity in particular – very little representation of black people in our faculty and our students – the students ask me, what’s the best we can do? I said, let’s break that; but can you please fuel a movement that breaks all the barriers? And it is on the back of Black Lives Matter and the action of the students by themselves that created a club they called [FLY], for first-generation low- and intermediate-income students. That doesn’t happen if you don’t already have the seeds of diversity and create the environment; in this case, the faculty and the administration. When that happens from the students, you can easily imagine the power it has, compared to if the Dean says, I want that club. 

Also, because in the UK we don’t have a federal form like is available in the US, that gives us a sense of who is at the different levels of socioeconomic capacities, particularly financial. So unless something like that is started from the ground up and the students self-identify, there’s not much we can do. The consequence of that is that some of the best experiential learning that happens, and some of the social activities the students organize for themselves, are options that don’t cost much or don’t cost anything at all. They did that; but without us having that seed of diversity and creating an environment that is inclusive, that doesn’t happen. And I think you can easily imagine the power this has when it comes bottom up, compared to when it comes from the top.

Chris: Absolutely. In my experience, when I first joined the [LBS] Alumni Energy Club (too many years ago!) the leadership were a very strong majority from traditional industries, because that was the way the alumni base was. Now, the last person who was within traditional and extractive industries has moved out into consultancy, and he’s a green energy consultant there. So it’s now entirely transformed, from the alumni club. Equally as notably, the Student Energy Club is now the Energy and Sustainability Club. The people have spoken!

François Ortalo-Magné: See, we very much believe in creating an environment where diverse minds can connect and collide. I know it sounds like marketing speech – and that’s where it comes from! – but the fact is that we make it real. I like the fact that actually in our community, people know how to have those collisions of ideas, rather than fist fights or legal fights. Let’s engage with the content. 

That is something really special at LBS, and you see it in the diversity of the students, and you see it in how much everyone enjoys these electives where we have students of different generations together, from the pre-experienced to the executives. In the classroom, there are students who could be the parents of the others! But they learn from one another. Imagine a class about digital disruption where you have the 45-year-old and the 22-year-old together. That’s what we do here; but it starts from that curiosity, that openness. We just make you realize that this has a huge payoff. If you can take that for the rest of your life – remain curious and open – we’ve done our job.

Chris: Taking it back to climate, and the wonderful ideas of having more gender diversity, more people from their geographic South: How do you see that as feeding into the climate conversation on campus?

François Ortalo-Magné: We have people from enough countries around the world, and enough industries, that I bet we have a very comprehensive representation of different perspectives here. I’m glad that we can create a safe educational environment where people can voice their opinions and then maybe shift them over time. One thing that’s interesting is that I’ve been very clear – and this is a message has been heard by the students – that the alumni are our brand. So there are students who also internalize this and say, wait a minute; we’re coming with all kinds of different, diverse perspectives, but are we okay with every perspective being represented when we come out? Or is there some element that we should learn? And you know that unfortunately, climate has become so politicized. I think some of my colleagues have talked with you about the fact it’s become so emotional. But on the other hand, another one of our academics told you: science is science. We can argue about gravity, but if I drop the glass, it drops!

Hopefully some of that happens as well in the classroom. I think we can be a place (hopefully, because research is such a foundation of who we are) where we help people distinguish causality from correlation, and ‘alternative truth’ from facts. We help them understand the power of basing your reasoning on evidence, because that shows up in the content of what we teach, in how we teach an approach. Hopefully this is happening in our school, and out of the wonderful diversity that comes in, there are some elements where we’ve created some boundaries that help people through the rest of their life.

Section 5: Sustainability in the modern MBA

Chris: Turning back to Forever Forward for a moment; it’s obviously a forward-looking, positive message. For anything to last the test of time, you need to have an element of sustainability in it. Have you built the ideas and concepts of sustainability into Forever Forward? It does seem to be implied. 

François Ortalo-Magné: Yes, good catch. Absolutely. I’ll tell you that the one shift that’s happening in the school as we speak right now. Because we care about impact; because we’re in tune with the world around us; because of our collective commercial responsibility, sustainability has been on the agenda of our faculty for a long time.

For example, it shows up in class, it shows up in electives. There was a report published or promoted by the Financial Times recently about, the publications that were related to the SDGs. They looked at five years of publication in the FT50 list of journals, and somehow we ended up number two. It’s not because my predecessor told them to do it, or I told them to do it; it is because they care about that impact.

What’s happening right now is that we are saying, because of the [climate] emergency, we need to be more intentional in our collective purpose. So by letting all flowers bloom, as it happens, we are already in the domain. We have the research foundation that is fundamental to who we are. So now it’s a question of deciding how do we promote this more; maybe in the teaching, but also in the engagement of our alumni and in our operations ourselves. 

There is an extra dimension. Because we are a convening school in London, we have quite a bit of a convening power. What responsibility can we take, given that opportunity? So that’s what’s happening actually as we speak right now: federating what’s happening; informing one another about all these things that we do; and then bringing some coherence.

We already have had some philanthropic support, and I am working as hard as I can to bring some more to help federate and amplify the impact of what we do already.

Chris: Okay. You mentioned that it’s kind of feeding into the classrooms. Is it the individual faculty who are putting together portions of the lectures on it, or is there thought of maybe having sustainability as an elective or core module?

François Ortalo-Magné: At every moment in our history we have evolved. It started with faculty members individually, maybe writing a new case with a new slant to it that that helps address sustainability issues that you cannot find in all those cases that were written at a different time, for example. 

Then we continue with faculty working together to shift, within the core of their teaching, maybe some of the emphasis, or shifting the electives. Every year we stop some electives, we start some new ones. It has been wonderful to see some faculty saying: maybe this is a different topic, so maybe we should approach it differently. So for example, a Professor of Strategy and a Political Finance saying, this is a topic that requires us being coherent together with the students. It will be a lot more than just an elective in sustainable finance and strategies. No, let’s have the same student look at those topics. 

I think what’s happening next – and it’s in the works –is us being able to tell our students: if you’re really passionate about this topic, here is a coherent set of classes and experience you could take that gets you almost a specialism around sustainability. And then the next step that we need to work on is acknowledging that we are a business school by ourselves; but in London there are competencies that we need to bring into the school, to help future leaders have the full understanding that we think they should have, even if it’s not within the research area of our faculty. So we have a good track record of that when we pushed analytics, years ago. We went out and hired people who could help us with artificial intelligence and big data, to bring that expertise. Right now we are that step of saying, now we’re clear as to what we can do individually and together, what is we need to bring in?

Chris: When I was studying here, return on equity was everything. You almost entirely forgot about all of the other factors. And now, Sustainable Development Goals and ESG seems to have changed the narrative in and around that. How has the school adapted, moving from very much a finance and equity type model, towards taking broader ESG notions into account, that the world’s more interconnected than we thought it was.

François Ortalo-Magné: First, actually, I think when you were taking your classes there were already organizational behaviour classes and strategy classes that were about the more human aspect of leadership and management and the broader aspect of choice. But maybe as a student, you didn’t feel so important. We hear that.

Chris: I think it was more about how to better optimize your firm to emphasize the results that you need, to benefit your return on equity. So it was all connected in that way, rather than look looking at the broader sense.

François Ortalo-Magné: So this was at a time when the rest of the world told those firms that this is what we want from you. And there was a hope at the time that this would be enough. Now the question is, where is the failure? I did my PhD in economics at Minnesota, which is maybe even more [Chicago] than Chicago! But even at Minnesota, we recognized that return on equity is not enough because there are a whole bunch of externalities in the world, a whole bunch of public goods. And the market will never, ever take care of these things properly. 

What we’ve learned over the years is that you can’t really just count on the policymakers, the institutional, multilateral organizations, to actually send the proper market signals to market operators to internalize those externalities and those public goods. So I think what has shifted over time – and it is true that it took us a while to realize, not just as business school or business people, but I think as human beings it has taken us a while to realize – that there’s a real responsibility in setting up the environment for firms to perform, while at the same time making sure we manage these firms properly so that they can do the best for us. We all love how cheap so many things are in relative terms, and the rate of innovation that got us out of COVID so fast. But was it fair to ask these companies: oh and by the way, pay attention to all these things that now we’re not going to price for you. Yes, the furniture should be produced in a way that is sustainable, but keep it cheap. 

What I like about what I see today in the conversation, is that there’s a greater awareness that business has a role to play, but it cannot by itself solve the crisis. This is very much an ecosystem that needs to evolve together. I often tell students the first thing you need to do when you graduate is vote. Vote and signal to the politicians your position. Because if you don’t vote, there’s no way they can aggregate your perspective.

Chris: Absolutely. Votes on the ballot box, and also vote will vote with your pound, your dollar. Support the brand, support the products that you believe in.

François Ortalo-Magné: So you would see in the curriculum that, in a context where we realize that purely running a business with a financial objective was actually not good for the world, it also wasn’t good for the business. Because another element that has become very much alive is the fact that businesses realize now that this externality, this pollution or whatever is not being priced yet. But someone’s going to knock at the door one day and say it is time to pay, so I might as well get ahead of that. I think those incentives have been and remain powerful, and it gives me hope that businesses will make the right decision. We want to create an environment where our students definitely understand that.

There is one place where there is a next step in evolution that’s required of us, because in the world we have gotten a bit confused about what is scientific evidence and what is not. I hope we will push that understanding with our students. In today’s world we don’t just need to do that with regard to the scientific evidence relative to management, leadership, strategy, finance, whatever. But there’s probably an opportunity for us to be clear about the scientific evidence that’s relevant to climate and other public goods, so that we can help our community assess for themselves. Because it’s not clear where else in the world there’s a trusted partner that can bring some of these issues to light.

I really worry today around the fact that, from the institutional environment, we are not giving much guidance to business on how to trade off potential actions across different environmental issues. For example, I was recently talking with the Chief Strategy Officer of a big multinational company. It has a big impact on the environment, given the nature of their business. They have a big impact on water, on plastics and on biodiversity because of the nature of their business. It’s not like they choose to; and they want to improve things. How should it prioritize across water, plastic and biodiversity? Right now the prioritization is very simple: it is based on the impact on the bottom line. How can we expect anything else from them? But this is someone who really wants to do well, and has to choose how to allocate money between these impacts on water, on plastics and on biodiversity. Right now as a society, as human beings, we are not sending a signal that is meaningful to this Chief Strategy Officer. So I hope that we’re going to find a way, at some point, to help them do the good that they are seeking to do. 

Section 6: rethinking land and housing economics

Chris: I think it would be remiss of me not to take the opportunity of tapping into your knowledge and your academic background in housing economics. If we were to properly price the cost of climates into the current housing market, we would probably end up just tanking the entire market and causing like an unprecedented financial crisis. But we can’t just ignore it and hope it goes away, because it won’t. How can we deal with the proper pricing of climate on the largest financial sector on the planet – housing and property and land?

François Ortalo-Magné: This is why I’m so glad it’s E, and also S and G. We have to think about all these factors. [Land] is a big element of climate; it’s also a big element of people’s lives. We have to acknowledge that in the past we haven’t paid attention to the E factor, and we’ve allowed cities to develop in floodplains, for example, or big towers to be built on foundations we know to be going. So we have to pay attention to that element. 

If I pull back and say, what is the most important human element right now when it comes to housing in particular in this country? We haven’t built enough. This is something where housing economists, frankly, are just exhausted, tired, frustrated, angry. How many times can we tell governments that the problem with housing starts with supply? In particular, in London, just look around; look at the height; look at the greenbelt. One of my papers is about what happens in a world where people can choose where they locate, how much they invest and how they vote on urban planning. Our fundamental insight was that affordability and owner-occupancy are two mutually incompatible objectives.

Most governments, the UK included, trumpet that their objectives are homeownership and affordability. So we created a system that didn’t pay attention to all these externalities, to impact on the environment that does become unaffordable with so many owners. Now I connect this back to the issue that we have relative to pricing these things properly; that anything we do that affects a market is going to affect the wealth of so many people who are not ready to be affected in such a meaningful way relative to their wealth. So we are in a real conundrum. 

The opportunity is that, starting from first principles, let’s release the right kind of supply we need for the future so that we can facilitate a transition where everyone has access to proper housing and then make that housing sustainable. I mean, it is now pretty clear with the cost of living crisis in this country that insulation matters. I look at the stock in the UK, the housing conditions are terrible. So, the human aspect is important and we have created the problem by pushing so much for homeownership. 

It’s something that you find in farmland as well, is land captures the residual value. Everything we do has been capturing this value; this value has been distributed; and the problem that you’re new to is the fact that now we realize there was never as much value as we told you there was. Your land is going – how do we destroy all that wealth? The opportunity is to find ways to create wealth someplace else.

Chris: Fair. I think we’ve traditionally been very narrowly defining land is really as a factor of production, from the economic view. It’s been a second-class citizen to capital and to labour. But land is far more than just a factor of production; it has a much deeper impact on the world. It has a much deeper impact on biodiversity, on carbon capture, etc. Where do you see the academic thinking on lands going, particularly in the field of economics?

François Ortalo-Magné: You’re right to point out that there’s something special about land compared to capital. It is true that today we are waking up to the fact that land plays a very important role relative to the climate, for example, relative to biodiversity. Sometimes the use of land that helps us have a healthier life is not the use of land that has the highest economic value, as defined by the market by itself. There is a way in which the capital one invests into plants also has some of this feature. We just waking up to it around land. 

This is the one difference I would emphasize, that land is fundamentally scarce. There’s only so much. You can expand your thinking around planning restrictions etc., but in the end, it is about what economics calls the residual claimant. It goes back to the point that that we discussed before: once we decided that there were these restrictions on building in London with the greenbelt around it, with the height restriction, there is only so much land; and the high performance of London gets reflected in that land.

What my research contribution was about was to point out that once you take this into account, you create tremendous wealth effects that are heterogeneous across people. The people who own their housing today in London, who bought it in the seventies, die in a very different wealth position than those who bought last year. And I don’t think we understood that land per se would have this huge impact on wealth distribution, which will then will affect people’s perception of what’s happening in the world around them, in their voting behaviour and their purchasing behaviour.

What I see has happened in research is that understanding (which as it happens, mathematically is not easy to capture), I think the research has moved forward to really integrate that into the thinking. A concrete example that you see some of our faculty working on: when you design a policy to green housing, for example to promote better insulation or different use of energy, it makes a difference whether it’s for the rental sector or for the unoccupied sector, because the owners sit on different side of the fence as to the consequence.

So what’s happened in the research is we are much better at understanding the heterogeneity of people relative to land, and that will allow us to design better policy that accounts for this. It’s really hard mathematically, but I was researching this in the nineties and lots of colleagues have made lots of progress since. I think we’re getting better at helping government design policy, to understand how they can organize themselves to still deliver the outcome that they care about.

Section 7: whom do you serve?

Chris: We’re coming to an end. Two final questions: I’m minded that every year you speak to large cohorts of graduates, and you put them out into the world. What piece of advice do you most commonly give to graduating students?

François Ortalo-Magné: First of all, I’m even more excited about that than about research. The best moment in the life of a Dean is giving the graduation speech and sending them off. So thank you for asking about that. Every year I try to have a different message based on my understanding of the class and what’s happened to us all.

This year I wanted to leave them with a question. A question that was so essential to us as we went through the pandemic, because it was hard on the school – we lost a third of our revenues in the shutdown. And I like the fact that before the crisis we had been clear with ourselves as to, whom do we serve? I mentioned the alumni; we had to retrench our allocation of resources, but we serve the alumni so whatever we do, we’ve got to keep that in mind. 

Because we caught up in the graduation with the two classes of graduates during the pandemic, that was the message of the moment: ask yourself as you go on with the rest of your life, whom do you serve? Take your time to ponder and be clear about that. You’ll think about it!

Chris: Yes. Choose a career that you’d give your life for because…you will! 

Last question: I know we’ve been talking quite a lot about about climate and the challenges ahead of us, and how hard it is hitting some communities. But also there’s the work that’s being done, the positivity about how we might be able to make a change. Would you have a note of optimism, from work and school and community, that’s we should be holding in mind in the world of climate? 

François Ortalo-Magné: I have Three. The researchers have been on these questions for a long time. There is so much to learn from them, starting with the questions they ask, the insights they generate, the perspective they shed light on. That’s one. Number two is I see how passionate so many of our students are around these issues. Now they are driving us to evolve, and driving themselves through their clubs and the events that they organise. 

Third, I want to finish with a compliment. We have alumni like you, who are taking the research into the conversation! If you go back over the conversation we have had, this is fundamental to progress for all of us. Thank you for engaging our researchers and shedding light. Yes, on some things we disagree. I love the fact people say, economists don’t agree with each other. But there’s some things actually we do agree with in a lot of this research. If I let go of this glass, it is going to go down; and there’s a lot more we know about the world than just about gravity.

You are helping take some of these insights into the world. If as a school I can see our researchers, our students, our alumni engaging together, then LBS will be doing our job. We will have that profound impact on the way the world does business and – impact squared, right? – on the way business impacts the world.  That gives me optimism and that’s why I love my job.

Chris: Fantastic. I’m going to be doing a lot of thinking about who I serve. Thank you so much for that, François. Thank you. 

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