21 Nov 2023
Academic Open Lecture Explores Value Evaluation and Decision Optimization
On November 21st, GEC Academy successfully concluded its last 2023 Global Top Scientists Forum delivered by Professor Pedro Saffi on “The Value of Anything: How Finance Can Help Us Make Better Decisions”. The illuminating online open lecture shed light on the assessment of value from a financial perspective, providing a nuanced examination of the costs and benefits inherent in each of our choices. It facilitates a more profound scrutiny of the underlying financial considerations, thereby empowering individuals to make decisions that are judicious and well-informed.
As Professor of Financial Economics and Director of Master of Finance Degree at Cambridge Judge Business School, Professor Saffi’s previous teaching experience includes courses for MBA, EMBA, MPhil and Executive Education students at Cambridge Judge Business School, IESE, London Business School, etc. His research interests include security lending markets, short selling, liquidity risk, and how differences of beliefs affect trading volume. His consulting experience is centered on valuation, including work as an expert to international arbitration courts, and the analysis of pharmaceutical firms’ value. He has also presented his work in the most prestigious academic conferences and contributed with articles to popular press, like the Journal of Finance, the Review of Financial Studies, Management Science, and the JFQA.
The main topic of the lecture was value evaluation and decision optimization. Professor Saffi placed particular emphasis on the notion that the value of anything is a function of the future benefits that making this decision will bring. He posited that the value of a choice is not solely contingent upon its monetary worth, but also encompasses a multitude of non-monetary factors that yield tangible advantages.
While talking about how to evaluate the worth of our choices and make well-informed decisions, Professor Saffi provided insights into two pivotal concepts during the lecture: cash flows and the time value of money. To quantify value, it is imperative to convert all costs and benefits to monetary flows. He underscored the dynamic nature of money’s value over time, necessitating the conversion of future money into their equivalent in the present.
Professor Saffi then extensively explored the practical application of cash flows and the time value of money in evaluating the value of projects and firms. Regarding the topic about how to estimate the value of a firm, Professor Saffi used Tencent, one of the largest internet companies in China, as an example to illustrate his point. He held that it is necessary to forecast expected future cash flows of the company and assess the level of risk associated with cash flows, which requires a solid understanding of accounting, a thorough examination of the company’s historical data, and an assessment of any changes in strategy or product launches.
The open lecture concluded with students actively engaged in thought-provoking and insightful discussions with Professor Saffi during the Q&A session. Delving into topics like discount rate calculations, quantifying costs and benefits, and global economic development, the discourse was both insightful and engaging. Professor Saffi underscored the paramount importance of a comprehensive understanding of financial theories in estimating the value of projects, firms and various decision-making process. Within the realms of finance and economics, he stressed that genuine success is often attained by those who can integrate art and science.