From Investment Banking to Higher Education

Posted by Aiko Tokiyama on May 9, 2019 5:21:04 PM

For this month’s Byline ICS interview, we sat down with EMBA Program Director, Tomonori (Tom) Ito, who talked about his career shift from investment banking to higher education.  

Marketing team:  Thank you for the interview. When did you decide you wanted to become a university professor?  

Professor Ito:

When I decided to leave UBS, I started thinking about my next move. I came up with three options. The first was to start my own investment banking boutique, because I already had many clients that I had developed at UBS. The second was to work for the government, something I had always been interested in doing. And my third option was to become a university professor. As I weighed these options, I went to see a CEO of a major Japanese corporation that I was close to and respected a lot. When I asked his opinion and presented the three options, he immediately said, “You should become a university professor.” I asked him why. He said, “Because if you become a professor at a higher education institution, you can do all three at once. As a university professor, you will be asked to become an outside board member of major Japanese corporations (currently I serve on three boards) where you can provide advice to corporations, which fulfills your first option. Also, as a university professor, you can advise the government by serving on government committees (I have served on a number of government committees), and you can teach. So, this covers all the paths you want to pursue. And I thought, “Oh, this makes sense.”  This CEO introduced me to ICS.

Marketing team:  How did it go?

Professor Ito:

I did not have any teaching experience, but I had a lot of M&A and finance experience, having advised many corporations during my 32 years in finance.  So, I knew there were a lot of very practical things in corporate finance that I could teach to business school students. I was very lucky that ICS was open-minded. They decided to let me teach for one year as a test, despite my lack of teaching experience. 

Marketing team:  So, you started teaching? 

 Professor Ito:

Yes, I started teaching in 2011. I taught an elective course, one that I still teach, which is Applied Corporate Finance. Thanks to the 2011 students, who liked my class and gave me good evaluations, ICS extended my contract and then I became a full-time faculty member. And here I am.

Marketing team: So what was the transition like, from the head of investment banking at one of the world’s largest investment banks to a professor at ICS?

 Professor Ito:

It was a substantial change in many ways. Practicing finance and teaching finance are totally different. I had to go back to re-learn finance, so I picked up my old corporate finance textbook from Harvard Business School and found that I did not understand finance as well as I thought I did. So, I read a lot of books and articles to refresh my understanding of finance, but I still had to figure out how to teach it. I went around asking faculty members for tips. Sherman Abe, who was teaching Corporate Finance when I joined ICS, was especially kind. He gave me a lot of tips on how to prepare and how to teach and allowed me to observe his classes. I attended all of his Corporate Finance sessions to see what he was teaching and how he was teaching it. Other faculty members, including Ken Kusunoki, Yoshi Fujikawa, Kenny Koga, and Toshi Akutsu also taught me a lot about teaching and let me observe their classes. Teaching with the case method is very different from just lecturing and requires a lot more experience.

I also had to read many cases to select the right ones for my course. This wasn’t easy and it took a lot of time. I also decided to write a case on Japan Tobacco’s big M&A, which I still use in my classes today. The CEO of JT gave his immediate consent and offered to let us interview him and many other JT executives so we could develop the case. Since I did not know how to write a case, I asked Yoshi to co-author it with me. Together with a DBA student, we interviewed the Japan Tobacco executives. All in all, it took me about six months to develop the case. It also took me about six months to build the curricula and prepare for my classes. Luckily, I had the time since I had already left UBS.

It was a big transition. UBS was a large organization and I had a sizeable staff of about 200, at the peak. In my 16 years at UBS, I had never created my own PowerPoint presentation. Nor had I prepared a single Excel valuation model. The junior bankers working for me did such work. But at ICS, I did not have anybody to create my slides or valuation models, so I asked a UBS junior banker to teach me how to use PowerPoint and Excel. He gave me a five-hour lecture and also prepared a manual on Excel and PowerPoint.

 Marketing team:  That shows how much you were loved by your staff at UBS. From your extensive professional experience in corporate finance, what are the key takeaways that you share with Hitotsubashi ICS students?

Professor Ito:  Well, there are a couple of things. Even though I teach courses on finance, I tell them that just looking at the numbers is not enough to understand a corporation. Finance is very important, but it is only a defense and having a strong defense does not mean that you can win. Don’t even try to use finance as an offense; almost all the corporations that have done so have failed, ending up in bankruptcy or with their CEOs in jail. So, that is something to avoid. Moreover, students must see the corporation as a whole. This is the most significant lesson; finance is a part, not the whole.  

The other takeaway is one of the most important concepts in finance: risk. There is a positive correlation between risk and reward; if you aren’t willing to take risks, then you won’t make high returns. This is almost always true in financial markets, and I believe it is also true in business, but most importantly, it is true  in students’ personal lives. I tell students that, for both individuals and corporations, the biggest risk is not taking any risk. I encourage my students to take risk, especially when they are young; even if they fail, they can recover very quickly. But if they are not willing to take risk, then the rewards will likely be low.


About Professor Tomonori Ito (Tom) 

HitotsubashiICS_ItoTomBefore joining ICS, Professor Ito spent 32 years in finance and investment banking. He worked for UBS in Japan as Co-Head of Investment Banking. Before joining UBS in 1995, he worked for the Bank of Tokyo, spending five years in New York City. Professor Ito’s research focuses on (1) key determinants of successful and unsuccessful M&As in Japan; (2) optimal capital structure and changes in the market environment; and (3) diversification and cost of capital. Professor Ito provides consulting and executive training to many of Japan’s leading corporations and serves as an external board member for Parco Co., Ltd., Aozora Bank, Ltd., and Electric Power Development Co., Ltd. (J-Power). He holds a BA in Economics from the University of Tokyo and an MBA from Harvard Business School.

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