Comprehending Complexity of Financial Markets Using Films

For the last two decades, films have been used in the teaching of complex organization behaviour and management concepts by many business schools across the globe. Selected clips from several acclaimed films have been used to illustrate the complexity of multi-party negotiations, game theory problems in economics and business, organizational behaviour and leadership narratives, organizational politics, dilemma and behavioural biases in decision making situations, etc.
For example at many business schools in India, "12 Angry Men (1957)" a popular film and its Indian adaptation "Ek Ruka Hua Faisla (1986)" have been used several times as teaching material to illustrate how the presence of a sole dissenting voice in a team can convince others members of the team to re-examine the decision making process and re-assess their decision, albeit in an objective manner.
Generally in a classroom setting, narratives that use dependent and independent variables to show how their interaction shapes the decisions or outcomes of an individual, group or organization are preferable as teaching materials. Movies, like case studies, enable to understand how the sequence of events, the role of various characteristics in a particular context, has an impact on outcomes and determines the organizational processes. This perspective is valuable in many ways.

At NMIMS in 2008-2009, along with several faculty colleagues, we used "Class Action (1991)" film to sensitize students to the ethical dilemma faced by the protagonist who was suing a car company for a safety issue and found out that the lawyer defending the company was her father.
Following some of these positive teaching experiences, we proposed the use of selected films to highlight complex issues in finance, microstructures of the financial market and in order to enhance the learning process.

The objective was to use plots and subplots in the films to demonstrate that problems and issues are often amenable to economic analysis and behaviour in financial markets. For each session, a combination of readings and cases was proposed. It was expected that students would gain significantly by using a combination of readings and films and develop insights on commercial negotiations, understand dynamics of financial markets and financial transactions, and improve their acumen of analytical thinking. The prerequisite for this course was to have completed core courses in finance and accounting. The following is the list that I had compiled for the purpose of the course:

Wall Street (1987): A film famous for the “Greed is Good” clip and depicting the stock market success of the 1980s; it illustrates the zeal of a stock market trader to do anything to reach the top position in a murky world of finance; and how he gets embroiled in a situation of insider trading. This film is quite useful in teaching the concepts of financial markets, greed, insider trading, and ethics.

Boiler Room (2000): How the desire for serious wealth seduces the protagonist to place money above all else. The film depicts how brokerage firms can create artificial demand for the stocks and then dump the stocks, leading the stock prices to plummet and causing a huge loss to investors, for their own benefit. The film provides an opportunity to discuss the concepts of government regulation, asymmetric information, and IPO scams in the market.

Barbarians at the Gate (1993): This film illustrates the case when the president of a major tobacco company decides to establish management control over the tobacco business. This movie depicts the actual takeover of RJR Nabisco, which was the biggest leveraged buy-out at that point of time. An interesting film to discuss the concepts of a management buyout, leveraged buyouts, negotiations in a takeover situation, and implications of an ensuing bidding war in such circumstances.

Other People’s Money (1991): This is one of my favourite movies. The two clips from this film on “why” to takeover and “why not” to, are worth watching. The film depicts a hostile takeover situation, where the raider buys inefficient businesses and sells their assets. The selected clips from this movie are excellent to illustrate the concepts of inefficient firms, buyouts, and restructuring. The film also brings out the human side of restructuring quite well.
Rouge Trader (1999): This is the real story of Nick Leeson who was responsible for the bankruptcy of Baring Bank, one of the oldest English banks, and where the Royal Family of UK used to have their accounts. I have used this film and the case of Baring Bank to discuss the concept of control systems in financial organizations, various behavioural biases and how they play out in loss making situations such as gamblers’ fallacy.

The Man in the White Suit (1951): This film describes the story of an obsessive innovator who develops a brilliant product – an indestructible cloth - considered to be a boon for humankind. The established market players do not like this, as the product will disrupt the market. Even labour unions feel that the product must be suppressed for economic reasons. The film presents an interesting situation, allowing for a discussion on market structure, competition, market power, and game theory concepts.

The China Syndrome (1979): After witnessing an accident at a nuclear power plant, a TV reporter is interested in publicizing the incident. However, as a result of associated liability issues, the story is quashed. Bringing in the regulatory commission does not help. The company is determined to keep the reporters quiet. This film is a useful addition to discussing the role of information, handling of the press, discussing market failure and externalities.

Roger & Me (1989): This is a documentary about the closure of eleven plants of one of the world’s largest corporation – General Motors. The closure resulted in significant loss of jobs. The company reinstalled these plants in lower-wage regions. The film aims to find the rationale of such decisions and is a useful vehicle to discuss concepts of competition, economic restructuring, labour wage arbitrage, and international finance.

The Shawshank Redemption (1994): This film narrates the experience of a successful banker who is convicted of an offence. This is a brilliant film to discuss how to deal with new situations, interpersonal behavior and individual behavior under difficult, isolating and trying circumstances. Discuss an extreme situation of a banker’s successful career to conviction and change in life.

Swordfish (2001): Situation of dummy corporations, secret operations and unattended money locked behind a super-encrypted system, and the intention to use these funds to fight a war against international terrorism. This film is useful in discussing dummy corporations and terrorism finance.

The Wheeler Dealer (1963): When his core business is not doing well, an Ivy League educated business owner arrives in New York to play in the stock market. An interesting film to discuss using money from core business to play in stock markets, and the role of stock analysts.