Gillian Tett: Finance Needs to Go Back to Basics

 

This is part three of our innovation series where influential voices from finance and economics tell us their ideas on financial innovation, its importance to economic growth and where the next big ideas are coming from. Watch part one and part two of our series.

As she opened a panel on market volatility at the Milken Institute Global Conference this year, Gillian Tett asked the audience, “Are we heading for significant volatility? And if so, will that be good or bad?”

Tett knows the good and bad of volatility having served as a reporter, editor and bureau chief for the Financial Times on three continents, including her current role as U.S. Managing Editor. One of the examples of good, what she called “the dirty little secret about volatility” at the Milken conference, is that volatility creates news and helps sell papers. But she also knows the risks presented by volatility and how, historically, derivatives markets have played a critical role in minimizing exposure to volatile markets. In fact, Tett knows the history and makeup of markets well enough that she is writing a book that looks at the financial system through the lens of cultural anthropology.

So when we asked her about market innovation, she turned the question on its head. Innovation suggests that we should always be looking forward, but as Tett told us, sometimes innovative ideas can come from the lessons of history. The first commodity markets provided an example that could aid market participants today — a back to basics approach.

“The need to protect both consumers and producers from violent market swings is probably more necessary now than ever. So, I would suspect in the coming years, debates around what’s happening in some of the commodity markets will become increasingly important.”

Watch her full response in the video above.

Read More: Andrew Lo of MIT Discusses the Financial Wave of the Future

Evan Peterson is director of corporate marketing at CME Group and managing editor of OpenMarkets.

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