The eternal tourist

PASSING THROUGH: Eduardo Schwartz

If ever there was an award for the master of understatements, Eduardo Schwartz, professor of finance at the University of California, Los Angeles (UCLA), Anderson School of Management, would win it hands down. Why?

"Things have changed from the last time I came to India," he says. That was almost 37 years ago, as a tourist.

And like most tourists, his first stop was Agra to see the Taj Mahal. This time though, the 64-year old Chilean is on an academic assignment. He has been invited by the Hyderabad-based Indian School of Business (ISB), where he is slated to take three classes.

And the subject? One of his pet topics "" the rational valuation of Internet companies. To be more precise, instead of looking at the traditional method of valuing companies, Schwartz's model provides for future financing costs and includes capital expenditures and depreciation in the final analysis.

"The model, I feel, gives a far more realistic picture of valuation as we have used techniques from the real options theory and capital budgeting and how key variables, which are not usually looked at, can actually play a decisive role in the valuation of internet companies," says the doctorate in business administration from the University of British Columbia (UBC) in Canada.

Schwartz acquired his bachelor of industrial engineering degree four decades ago from the University of Chile and then winged his way to British Columbia to do his masters in business administration with a specialisation in finance.

He then took up a teaching assignment in UBC. In 1986, he switched from UBC to UCLA for a very simple reason. "They doubled my salary and how could I say no?" says the thin six-footer candidly. Ask him anything else and Schwartz speaks in measured terms with a heavy Chilean accent.

So while he has been in India for just over a week, Schwartz is impressed with the quality of the students he is interacting with here.

"The quality of students I have at ISB is very good. I am teaching an advanced class and only those who are very good get in. They are clearly better than the normal," he says.

"In the last 40 years, a lot of things have changed. Before everything was government controlled and today a lot of things around have been privatised and that represents change. There is a lot more private initiative today, a much more open economy, tariffs have come down and India is on the road to being a very open country, though it is not one yet," he points out.

And for somebody who had encountered unimaginable levels of poverty on his last visit, this change is something he is coming to terms with.

"This is a country on the move. There is momentum. Just look at this school "" this is better or as good as the best in the world. The whole dynamics has changed," says Schwartz.

"Today India is connected with the world. Now they are part of the world intellectual community and that was not the case the last time I was around. Today, though there is a lot more poverty, there is a big middle class in India which has a huge amount of purchasing power," he adds.

Indications of a progressive India for Schwartz lie in the level of intelligence in conversations. "Some of the issues that we can talk about today could not have been spoken about 37 years back. Topics like 'puts and calls'," he says.

According to him, such terms are easily decipherable to his students at ISB. "This would not have been the case earlier," he adds.

And how does he measure the success of financial reforms? He has a simple barometer in place. "A well-functioning financial market is one which allows money to be channelled into productive activities. It is essential to channel money from people who save to people who produce."

Clearly for him, India has arrived on the world scene. "Today there is a people movement both ways. Earlier it was only people leaving India. Now they are coming back because there is so much more to come back to, like this school here. India is the place to invest today and the rates of return are quite high." Will this bring him back? "Yes," he retorts.

Despite his lectures, Schwartz will be around for a month, doing what he loves best "" travelling. His hectic itinerary once again includes tourist-related visits to Bangalore, Kochi, Mumbai and Rajasthan before he flies back from Delhi.