They say follow your passion to wherever it takes you. Yang Fan, the new Todger Anderson Assistant Professor of Investing and Behavioral Economics, did just that. He followed his passion for teaching and changed coasts, from West to the East. Now, he’s helping his students find and pursue their passions as well.
As a student, Fan’s life has been impacted by great teachers and mentors. Whether he was earning his M.A. from San Francisco State University or an economics Ph.D. from University of Washington (where he studied the impact of corporate boards), they pushed him to find what mattered to him. “I really like the student-teacher interaction and seeing the student grow over time. I got that from having great mentors,” he said.
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That mentoring led to his ongoing economics scholarship, including examination of the effect of the makeup of corporate boards, selection of chief executives, and CEO compensation. But standing in front of 75 undergraduates as a graduate student, he quickly grasped that these classes were unlikely to yield strong mentoring relationships with many students. Moreover, he noticed that most courses were taught by graduate students, and professors didn’t even interact with students until midway through their junior year.
“I just didn’t think that was the right way to teach,” Fan said. “I felt like my teaching philosophy fit with small classrooms, broad-based teaching, and the opportunity to explore and try different teaching techniques, where there’s a balance between teaching and scholarship.”
So Fan looked east. “We’ve lived in big cities, but we’re not really big-city people,” he said of his wife and two children.
The transition was perhaps easier because he was following his passion for teaching. At Colby, he plunged right in, exploring new teaching techniques in his first semester.
His aim, he said, wasn’t necessarily to train the next generation of economists, but to “romance people into the major” and provide them with the necessary tools they could use after the class.
Fan created an exercise called “the news rundown” in which students submitted news stories from the past 48 hours that would be used in class as vehicles to explain macroeconomics. The result, he said, was great class discussion.
“Colby students are inquisitive,” he said. “They question a lot more things than students that I have taught elsewhere. It’s exciting in that sense. Students do a great job of keeping me on my toes, and I have to be very careful in how I craft my answers.”
Outside class, he’s guiding students to shape their career paths. He’s listening to stock pitches—a crucial part of interviews in investment-related jobs, where candidates assess investment opportunities—giving feedback, and helping them prepare for internship interviews in finance and other areas. Through this, he hopes to build a network by students, for students.
“I point students in the right direction,” he said. “And when these students succeed, they can also guide the next set of students.”
For Fan, the most rewarding part of all is when the students call and say they got that internship. “That makes me really, really happy,” said Fan.
Opening the Black Box
Economist Yang Fan considers the people really calling the corporate shots
Apple, Google, Microsoft—we know their products and their top executives but what do we really know about the effect of their corporate board members? Not that much.
Yang Fan, who joined Colby as the new Todger Anderson Assistant Professor of Investing and Behavioral Economics last fall, is working to change that by opening what he calls “the black box” of high-level corporate control. So far, his work has investigated corporate board networks, board composition, selection of chief executives, and CEO compensation.
Fan’s interest in corporate boards revealed itself early in his research. While earning his M.A. from San Francisco State University and a Ph.D. in economics from the University of Washington, he began reading press releases announcing companies’ newest board members and noticed that many sat on multiple boards. “We think that the CEO and the management team have a lot of day-to-day power,” he said, “but the directors are the ones that are acting at the behest of shareholders and are tasked with overseeing the management team. And they are a black box. We have no idea what they’re doing.”
Why would a Walgreens executive serve on Tesla’s board? How would Uber benefit from guidance from a Nestlé executive? Did iPhones and Android phones differ when Google and Apple shared board members as the two companies became rivals?
When he dived into studying board networks, he noticed a connection with product differentiation. Nowadays, many large firms are producing goods in various segments. Apple computers compete with Microsoft while its iPhones are rivals with Android phones.
“How then, in that sort of very complicated world, are firms able to adapt and think about how they should be competing in multi dimensions? … How are they getting information of where they should and should not be competing?” wondered Fan. He found that firms closely connected through shared board members find ways to avoid competition by selling multiple products, for example. Firms that don’t share board representation remained more competitive.
One question led to another. Having researched board linkages, Fan then questioned why some board connections were more important than others. “Why would we choose one director versus another?” he asked, and proceeded to examine résumés of directors of S&P 1500 firms from 2003 to 2013. His conclusion: there was a significant benefit to hiring directors with different types and areas of expertise, especially if the director’s expertise differed from the industry expertise.
Up next: CEOs. Fan’s current research considers under what circumstances a firm might be better off hiring or promoting a chief executive from within versus hiring one from the outside. He argues, “It depends on the experience makeup of the other board members of the management team.”
He’s also begun investigating the relationship between CEO compensation packages and investment decisions. That research brings in his previous research on board networks and traces the effects of new board members in shaping CEO compensation packages. With this, he aims to find a way to incentivize CEOs to develop long-term investment decisions that can better the firm.
“I’m interested in things known as social networks,” said Fan, summing up his research. “Interaction amongst colleagues, amongst boards of directors, … and how these types of relationships can impact how we make decisions— whether they are good decisions or bad.”