November 2025

Managing Corporate Risk: How Consulting and Export Finance Complement Each Other

November 25, 2025 by Julien MAUROY

In this article, Julien MAUROY (ESSEC Business School, Global Bachelor in Business Administration (GBBA), 2021-2025) shares technical knowledge on risk management in the business world based on his experiences. The concepts of financial risk in business, risk management, and risk analysis will be presented. All of this information is drawn from my experiences and supported by literature on the subject.

Risk as a strategic lever

This topic aims to explore how companies manage risk and transform it into a lever for decision-making and value creation. It ties in with my academic background at ESSEC Business School and my professional experience in two complementary environments: finance and risk consulting at BearingPoint and export financing at Bpifrance. Today, risk-related issues are omnipresent in business. Whether it is competitiveness, investment decisions or international expansion, every strategy involves a degree of uncertainty.

Risk is no longer just a threat, it is anticipated, studied, calculated and has a market price: the cost of seeking advice, the cost of insurance, etc. It therefore becomes a key management factor for companies that can identify, measure and integrate it into their strategic thinking. This is why understanding risk management means understanding how organisations balance growth, stability and performance. It is this dual approach : consulting (risk reduction) and insurance and export financing (risk assessment and pricing), that I would like to share with you.

Reducing and structuring risk with consulting

During my internship at BearingPoint, I discovered how consulting could help companies reduce and structure their strategic, financial and operational risks. Consultants bring an external perspective to a company’s activities. They use an analytical, neutral approach to identify organisational weaknesses and make more informed decisions.

Within the Finance & Risk department, my assignments consisted of improving the financial performance and financial management of the company’s activities. The main topics were data reliability, reporting automation, and optimisation of budgeting and forecasting processes.

By improving the quality of financial information and its analysis, we helped companies become more agile and better able to manage their business. Companies gained visibility and the ability to anticipate future developments. Consulting is therefore the ideal way to transform uncertainty into a structured and effective methodology for addressing the challenges facing these sectors.

It helps companies adopt rigorous governance, allocate resources and budgets more effectively to each activity, and avoid costly strategic errors.

Finally, consulting helps reduce companies’ exposure to risk by providing support at all levels. It makes decision-making more rational, measurable and aligned with long-term strategy in light of competition and industry challenges.

Measuring and pricing risk with export insurance and financing

My experience in Bpifrance’s Export Insurance department gave me a different perspective on risk, this time more quantitative and institutional.

In this organisation, risk is not borne solely by the customer seeking insurance, but also by Bpifrance, which insures French exporters against risk arising from foreign buyers. The risk is therefore shared between the lending bank, the insurer and the French exporter.

In export insurance, risk is not abstract: it is analysed, measured and valued. The accuracy of the analysis is paramount, involving financial, extra-financial and geopolitical analysis. An in-depth study of exporting companies and their international counterparties makes it possible to assess their solidity and their ability to honour their financial commitments.

Each project is subject to a detailed risk assessment: counterparty risk, country risk, sectoral or political risk. These factors have an immediate impact on the premium rate applied to the export guarantee. In other words, the higher the risk of loss, the higher the cost of coverage. This approach, based on collaboration with the French Treasury and the OECD, has enabled me to understand how institutions can price risk on a global scale.

In comparison, consulting helps to anticipate, explore solutions and reduce risk, while insurance seeks to assess and price risk. At that point, risk is not avoidable, but is an integral part of the economic model.

Understanding risk in order to leverage it

These two experiences taught me that risk management is not just about protecting yourself from risk, but understanding it so you can use it as a lever for growth.

In consulting, risk is controlled through better organisation, reliable information and a clear strategy. In finance, risk becomes a measurable parameter, integrated into decision-making models and valued according to its potential impact.

These two approaches are therefore complementary: one aims to make the company more resilient, the other enables it to grow despite uncertainty.

These two perspectives show that risk, far from being a constraint, can become a strategic management tool, a driver of adaptation and a source of sustainable competitiveness.

Conclusion: the strategic value of risk management

Through these experiences, I have understood that risk management is at the heart of finance and strategy.

At BearingPoint, I acquired analytical rigour and the ability to structure my thinking, at Bpifrance I gained a macroeconomic vision and a concrete understanding of the link between risk and financial performance.

This dual perspective on qualitative and quantitative risk convinced me that knowing how to assess, integrate and explain risk is a key skill for the future of business.

In an uncertain world, managing risk means managing the relevance of decisions: this is what distinguishes companies that are able to anticipate the future from those that simply react to it.

Opening the topic with the vision of Frank Knight and Nassim Taleb

The study of risk in business has been the subject of earlier studies and research, notably initiated by Frank Knight in 1921 in Risk, Uncertainty and Profit. Knight distinguishes between two essential realities: risk, which can be quantified and insured against, and uncertainty, which cannot be quantified.

This distinction is further developed by Nassim Taleb in The Black Swan (2007), where he shows that certain extreme disruptions, known as ‘black swans’, cannot be predicted or incorporated into traditional models. Examples include pandemics, political shocks and sectoral collapses. For Taleb, the issue is not only one of prediction, but of building resilient organisations capable of absorbing unexpected shocks.

These two perspectives are directly reflected in corporate risk management. I have observed how consulting helps organisations reduce their exposure to ‘measurable’ risk, and conversely, my experience at Bpifrance immersed me in an approach where risk is quantified and priced. But neither consulting nor finance can eliminate uncertainty in Knight’s sense or Taleb’s ‘black swans’. Their role is to help the company better prepare for them by strengthening strategic robustness and adaptability.

That is why risk is no longer just a threat: it becomes a management tool and a lever for structuring action, in order to build organisations that are resilient in the face of the unexpected.

Useful resources

BearingPoint

Didier Louro (25/09/2024) Le risk management au service de la croissance Bearing Point x Sellia (podcast).

Bpifrance

OECD

Treasury department

Academic articles and books

Cohen E. (1991) Gestion financière de l’entreprise et développement financier, AUF / EDICEF.

Hassid O. (2011) Le management des risques et des crises Dunod.

Knight, F. H. (1921) Risk, Uncertainty and Profit Houghton Mifflin Company.

Mefteh S. (2005) Les déterminants de la gestion des risques financiers des entreprises non financières : une synthèse de la littérature, CEREG Université Paris Dauphine, Cahier de recherche n°2005-03.

Taleb N.N. (2008) The Black Swan Penguin Group.

About the author

The article was written in November 2025 by Julien MAUROY (ESSEC Business School, Global Bachelor in Business Administration (GBBA), 2021-2025).

BCapital Fund at Bocconi: building a student-run investment fund

November 25, 2025 by Roberto RESTELLI

In this article, Roberto RESTELLI (ESSEC Business School, Master in Finance (MiF), 2025–2026) explains how he founded BCapital Fund at Bocconi University—a student‑run, global‑equity investment student association—and what it taught him about markets, leadership, and teamwork.

Founding BCapital Fund (2022)

During my final semester at Bocconi University in Milan in 2022, driven by passion for financial markets and curiosity, I founded a student society called BCapital Fund. The aim was to bring together friends with the same enthusiasm and replicate— as closely as possible— the functions of an investment fund focused exclusively on global equities, rather than a typical university club centered on articles. It became the first student‑run investment fund in Italy and among the first in Europe.

BCapital Fund – Student Investment Society at Bocconi University.
Logo of BCapital Fund
Source: BCapital Fund.

Concept & investment approach

Using various online brokers, we simulated investments with US$1,000,000 in demo capital. Each month, we published a detailed report explaining our investment theses—supported by deep company research and macro analysis—modeled on the style of hedge‑fund letters. Report after report, we improved visuals, explanations, and content to make our publications as professional as possible.

We began with eight members (first‑year BSc students in Management, Finance, and Law). At the university society fair in September, the idea resonated immediately: we received 120+ applications and grew to 25 members by October, representing countries such as Russia, India, China, Italy, and the UK.

How we structured the fund

Portfolio Department: junior analysts, senior analysts, and portfolio managers responsible for investment decisions.
Macroeconomic Department: focused on inflation, central‑bank policy (e.g., Fed rate moves), and broader trends.
Data & Reporting: charts, report layout, and document production using Word and Excel.
Legal & Communications: documentation plus LinkedIn and Instagram pages.

For six months, a crypto sleeve—run by several passionate members—delivered a +33% return, contributing positively to the main equity portfolio’s performance over the period. Over time, our approach narrowed into a global‑equity and macro strategy. We also hosted campus events to share insights and engaged the broader student body, while steadily building a simulated‑portfolio track record.

Personal reflection

Now that I’m no longer a Bocconi student, I’m not involved operationally. I handed the society over to younger bachelor students who continue to add value and deliver performance, carrying the project forward as most of the original eight members have moved on.

This was the highlight of my bachelor’s degree: pursuing a passion with friends, learning continuously, and being recognized as one of the most innovative student initiatives in Italy. Most gratifying is seeing the project thrive beyond my tenure.

What I learned

I learned a great deal from a diverse team with complementary skills. Exposure to different departments let me explore portfolio construction and valuation, macro analysis and central‑bank actions, and the technical side of modeling and reporting.

Personally, I learned the importance of organisation and clarity. To execute and lead effectively, you need rigorous structure and precision—from sequencing investment ideas and valuation frameworks to standardising report templates and social‑media posts.

Teamwork was another key skill. Working in larger groups helped me collaborate, deliver projects in teams of five or more, recognise when others’ ideas are better, adapt the final outcome, and stay open to different viewpoints—well‑suited to my extroverted personality. Finally, mutual help matters: with the right people, everything becomes easier than going solo.

Concepts related to my society

Follow your passion: the project began organically with friends who shared a genuine interest—learning more and preparing beyond what university offers.
Just do it: step outside your comfort zone, take initiative, and build—without overthinking everything that could go wrong.
Keep learning: learning never stops; hands‑on practice is often more engaging than lectures, because you work directly with the topics.

Why should I be interested in this post?

If you are an ESSEC student curious about launching student initiatives or pursuing public‑markets roles, this post offers a practical blueprint: how to design a student investment fund, structure departments, recruit and scale, and publish professional‑grade research—skills that translate directly to internships and entry‑level roles.

Conclusion

BCapital Fund was more than a student initiative—it was a proving ground for disciplined investing, collaborative leadership, and continuous learning. Building a multi‑department team, publishing research, and iterating our process taught me how to set a clear vision, structure execution, and raise the bar. Handing the project to the next cohort—and seeing it grow—confirmed the value of creating something that endures. I carry forward stronger analytical judgment, sharper communication, and a practical sense of how strategy, macro context, and rigorous reporting come together in public markets.

Useful resources

Bocconi University

Bocconi Student Finance Society LinkedIn page

SEC EDGAR company filings

European Securities and Markets Authority (ESMA)

Bloomberg Markets

About the author

The article was written in November 2025 by Roberto RESTELLI (ESSEC Business School, Master in Finance (MiF), 2025–2026).

The role of DCF in valuation

November 25, 2025November 25, 2025 by Roberto RESTELLI

In this article, Roberto RESTELLI (ESSEC Business School, Master in Finance (MiF), 2025–2026) explains the role of discounted cash flow (DCF) within the broader toolkit of company valuation—when to use it, how to build it, and where its limits lie.

Introduction to company valuation

Valuation is the process of determining the value of any asset, whether financial (for example, shares, bonds or options) or real (for example, factories, office buildings or land). It is fundamental in many economic and financial contexts and provides a crucial input for decision-making. In particular, the importance of proper company valuation emerges in the preparation of corporate strategic plans, during restructuring or liquidation phases, and in extraordinary transactions such as mergers and acquisitions (M&As). Company valuations are also useful in regulatory and tax contexts (for example, transfers of ownership stakes or determining value for tax purposes). Entrepreneurs and investors can evaluate the economic attractiveness of strategic options, including selling or acquiring corporate assets.

The need for a company valuation typically arises to answer three questions: Who needs a valuation? When is it necessary? Why is it useful?

Users and uses of company valuation

Different categories rely on valuation. In investment banks, Equity Capital Markets use it for IPO research and coverage (including fairness opinions), while M&A teams analyze transactions and prepare fairness opinions to inform deal decisions. In Private Equity and Venture Capital, valuation supports majority/minority acquisitions, startup assessments, and LBOs. Strategic investors use it for acquisitions or divestitures, stock‑option plans, and financial reporting. Accountants and appraisal experts (CPAs) prepare fairness opinions, tax valuations, technical appraisals in legal disputes, and arbitration advisory.

Beyond these, regulators and supervisory bodies (e.g., the SEC in the U.S., CONSOB in Italy) require precise valuations to ensure market transparency and investor protection. Corporate directors and managers need valuations to define growth strategies, allocate capital, and monitor performance. Courts and arbitrators request valuations in disputes involving contract breaches, expropriations, asset divisions, or shareholder conflicts. Owners of SMEs—backbone of the Italian economy—use valuations to set sale prices, manage generational transfers, or attract investors.

Examples of valuation

Valuations appear in equity research (e.g., a UBS report on Netflix indicating a short‑ to medium‑term target price based on public information), in M&A deal analyses (including subsidiary valuations and group structure changes), and in fairness opinions (e.g., Volkswagen’s acquisition of Scania). They are central in IPOs to set offer prices and expectations. Banks also rely on valuations in lending decisions to assess enterprise value and credit risk, clarifying the allocation of requested capital.

Core competencies in valuation

High‑quality valuation requires business and strategy foundations (industry analysis, competitive context, business‑model strength), theoretical and technical finance (NPV, pricing models, corporate cash‑flow modeling), and economic theory (uncertainty vs. value and limits of standard models). Valuation is not just technique: it balances modeling choices with empirical evidence and fit‑for‑purpose estimates.

A fundamental principle is that a firm’s value is driven by its ability to generate future cash flows, which must be estimated realistically and paired with an appropriate risk assessment. Higher uncertainty in cash‑flow estimates implies a higher discount rate and a lower present value. Discount‑rate choice depends on the model (e.g., CAPM for systematic risk via beta). Sustainability also matters: modern practice increasingly integrates environmental, social, and governance (ESG) factors—climate risk, regulation, and reputation—into valuation.

General approaches and specific methods

Income Approach. Present value of future benefits, risk‑adjusted and long‑term (e.g., discounted cash flows).
Market Approach. Value estimated by comparing to similar, already‑traded assets.
Cost (Asset‑Based) Approach. Value derived by remeasuring assets/liabilities to current condition.

Within these, DCF is among the most studied and used. It can be computed from the asset perspective via free cash flow to the firm (FCFF) or from the equity perspective via free cash flow to equity (FCFE). Under the asset‑based approach, other methods include net asset value and liquidation value. Additional families include economic profit (e.g., EVA, residual income) and market‑based analyses: trading multiples (e.g., P/E, EV/EBITDA), deal multiples, and premium analysis (control premia). Four further techniques often considered are current market value (market capitalisation), real options (valuing flexible investment opportunities), broker/analyst consensus, and LBO analysis (value supported by leveraged acquisition capacity).

Critical aspects and limits of valuation models

Each method has strengths and limits. In DCF, accuracy depends on projection quality; macro cycles can render forecasts unreliable. In market‑multiple analysis, industry/geography differences and poor comparables can distort results. Real options are powerful for uncertainty but require subjective parameters (e.g., volatility), introducing error bands.

Practical applications of company valuation

Firms use valuation to plan growth, allocate capital, and budget projects. In disputes and restructurings, it informs liquidation values and creditor negotiations. It also supports governance and incentives (e.g., option plans) that align managers with shareholders. In short, valuation enables both day‑to‑day management and extraordinary decisions.

Discounted Cash Flow (DCF)

What is a DCF?

The discounted cash flow (DCF) method values a company by forecasting and discounting future cash flows. Originating with John Burr Williams (The Theory of Investment Value), DCF seeks intrinsic value by projecting cash flows and applying the time value of money: one euro today is worth more than one euro tomorrow because it can be invested.

Advantages include accuracy (when inputs are sound) and flexibility (applicable across firms/projects). Risks include reliance on uncertain projections and difficulty estimating both discount rates and cash flows; hence outputs are estimates and should be complemented with other methods.

Uses of DCF

DCF is widely applied to value companies, analyse investments in public firms, and support financial planning. The five fundamental steps are:

Estimate expected future cash flows.
Determine the growth rate of those cash flows.
Calculate the terminal value.
Define the discount rate.
Discount future cash flows and the terminal value to the present.

DCF components.

Source: author.

Discounted cash flow formula (with a perpetuity‑growth terminal value):

DCF = CF₁ / (1 + r)¹ + CF₂ / (1 + r)² + … + CF_T / (1 + r)^T + (CF_T+1 / (r – g)) · 1 / (1 + r)^T

Where CF_t are cash flows in year t, r is the discount rate, and g is the long‑term growth rate.

Building a DCF

Start from operating cash flow (cash‑flow statement) and typically move to free cash flow (FCF) by subtracting capital expenditures. Example: if operating cash flow is €30m and capex is €5m, FCF = €25m. Project future FCF using growth assumptions (e.g., if 2020 FCF was €22.5m and 2021 FCF €25m, growth is ~11.1%). Use near‑term high‑growth and longer‑term fade assumptions to reflect maturation.

Determining the terminal value

The terminal value represents long‑term growth beyond the explicit forecast. A common formula is:

Terminal Value = CF_T+1 / (r – g)

Ensure g is consistent with long‑run economic growth and the firm’s reinvestment needs.

Defining the discount rate

The discount rate reflects risk. Common choices include the risk‑free government yield, the opportunity cost of capital, and the WACC (weighted average cost of capital). In equity‑side models, CAPM is often used to estimate the cost of equity via beta (systematic risk).

Discounting the cash flows

Finally, discount projected cash flows and terminal value at the chosen rate to obtain present value. Sensitivity analysis (varying r, g, margins, capex) and scenario analysis (bull/base/bear) are essential to understand valuation drivers.

Example

You can download below an Excel file with an example of DCF. It deals with Maire Tecnimont, which is an Italian engineering and consulting company specializing in the fields of chemistry and petrochemicals, oil and gas, energy and civil engineering.

Why should I be interested in this post?

If you are an ESSEC student aiming for roles in investment banking, private equity, or equity research, mastering DCF is table‑stakes. This post distills how DCF fits among valuation approaches, the exact steps to build one, and the pitfalls you must stress‑test before using your number in IPOs, M&A, or buy‑side models.

Useful resources

Aswath Damodaran (NYU Stern) valuation resources

SEC EDGAR company filings

European Central Bank (ECB) statistics

Maire Tecnimont

About the author

The article was written in November 2025 by Roberto RESTELLI (ESSEC Business School, Master in Finance (MiF), 2025–2026).

“In investing, what is comfortable is rarely profitable.” – Robert Arnott

November 25, 2025November 25, 2025 by Hadrien PUCHE

In this article, Hadrien PUCHE (ESSEC Business School, Grande École Program, Master in Management, 2023-2027) comments on Robert Arnott’s famous quote, exploring how it relates to risk-taking, behavioral biases, and the mindset required to achieve consistent, long-term performance.

About Robert Arnott

Robert Arnott

Source: Research Affiliates

Robert D. Arnott (born 1954) is an American investor, researcher, and entrepreneur. He is the founder and chairman of Research Affiliates, a firm known for its pioneering work on smart beta and alternative indexing strategies. Arnott has written extensively on asset allocation, portfolio construction, and factor investing, often challenging traditional assumptions about market efficiency.

Throughout his career, Arnott has emphasized that the best investment opportunities emerge when investors are willing to leave their comfort zone, particularly when markets are volatile, sentiment is negative, and uncertainty dominates.

Analysis of the quote

When Arnott says, “In investing, what is comfortable is rarely profitable,” he highlights a fundamental paradox of financial markets: comfort and profit rarely coexist.

Comfort comes from stability, familiarity, and consensus. Yet, markets reward those who act rationally in uncomfortable moments; those who buy when others sell and remain calm when others panic. Profitable investing often requires doing what feels counterintuitive.

However, this quote does not promote reckless risk-taking. Instead, it reminds us that genuine investment opportunities often arise in periods of uncertainty and fear, when prices deviate from intrinsic value. Success lies in maintaining discipline and conviction when others lose theirs.

Moreover, this insight resonates with Frank Knight’s distinction between risk and uncertainty. While risk can be measured and priced, true uncertainty is unknowable and unpredictable. Investing in moments of discomfort often means confronting this unmeasurable uncertainty, and taking opportunities when most investors hesitate.

Case study: March 2020 – Investing during the Covid crisis

Between February and March 2020, the S&P 500 index fell by more than 30% as investors panicked and rushed to sell their holdings. However, those who bought stocks during the downturn (or even simply stayed invested) saw the market recover to new highs within just a few months. The real losses came not from the crash itself, but from panic selling at the worst possible moment.

To better understand why the market reaction was so violent during this period, it is useful to look at the VIX index, often referred to as the “fear gauge” of financial markets. The VIX measures expected volatility based on S&P 500 option pricing, and it tends to spike when uncertainty and investor anxiety rise.

In the graph below, which compares the performance of the S&P 500 and the VIX over the 2020 Covid market crash, we can clearly see how moments of market stress correspond to sharp increases in the VIX.

The S&P 500 declines at the same time the VIX surges, illustrating the sharp rise in market fear and uncertainty.
Source: TradingView

Financial concepts related to the quote

I present below three financial concepts: the risk–return tradeoff, the psychology behind discomfort, and contrarian investing and market cycles.

The risk–return tradeoff

Arnott’s quote connects directly to the risk–return tradeoff, a cornerstone of modern portfolio theory (Harry Markowitz, 1952). The principle is simple but powerful: higher expected returns are only possible when investors accept higher levels of risk.

In quantitative terms, risk is often measured by metrics such as volatility (the standard deviation of returns) or the Value at Risk (the expected maximum loss that could occur on a given period). Assets with higher volatility tend to offer higher average returns to compensate investors for the uncertainty they bear.

This relationship is evident across asset classes: equities have historically outperformed bonds, and small-cap or emerging market stocks have outperformed large, stable firms, precisely because they are riskier and therefore less “comfortable” to hold.

	Money Markets	Bonds (20Y TB)	Equities (S&P 500)
Historical returns	3.3%	5.7%	10.3%
Historical volatility	0.1 to 1%	10%	15 to 20%

These are the average historical returns and volatility of the main asset classes over the past century.
Source: “Long-Term Performance”, Martin Capital, and CFA Institute.

Those who prioritize comfort, by investing in stable, low-volatility assets such as government bonds or blue-chip stocks, may achieve safety but at the cost of limited upside. In contrast, investors willing to face volatility intelligently, through diversification, disciplined portfolio construction, and long-term perspective, can capture higher returns over time.

Ultimately, discomfort is not a flaw of investing, but rather the price of better returns. As every investor learns sooner or later, there is no reward without risk, and no performance without volatility.

This relationship between risk and return is often illustrated by the efficient frontier: as investors take on more risk (measured by the volatility of returns), the expected long-term return increases. The graph below shows this fundamental tradeoff, highlighting how low-risk assets typically offer modest returns, while higher-risk assets provide the potential for superior performance.

Graph of performance against risk

The psychology behind discomfort

Arnott’s insight aligns closely with behavioral finance, particularly Daniel Kahneman and Amos Tversky’s concept of loss aversion. The idea is that the pain of losing is psychologically about twice as powerful as the pleasure of gaining.

The chart below illustrates this asymmetry: while gains produce only a moderate rise in satisfaction, losses trigger a disproportionately strong emotional reaction, shaping many irrational investment decisions.

Losses hurt people more than gains make them feel good

This bias makes investors instinctively avoid risk, even when it offers potential rewards.

In financial markets, this aversion to loss often translates into herd behavior: investors seek comfort in doing what others do, buying overvalued assets during booms and selling undervalued ones during downturns. While this may feel safe in the short term, it systematically destroys value over time.

Legendary investors such as Warren Buffett and Howard Marks have long warned against this mindset: “Be fearful when others are greedy, and greedy when others are fearful.” True comfort in markets is often a sign of danger, not safety.

A good example is the dot-com bubble of 2000. At the time, investing in fast-growing tech stocks felt like the comfortable and obvious choice, as prices seemed to rise endlessly. Yet when the bubble burst, it became clear that this comfort had been an illusion, and that discomfort, not consensus, is where opportunity truly lies.

Contrarian investing and market cycles

Arnott’s quote also resonates with the philosophy of contrarian investing: the art of going against prevailing market sentiment. It means buying when fear dominates and selling when euphoria prevails.

As Minsky explains in his Financial Instability Hypothesis, periods of stability paradoxically encourage increasing risk-taking, as market participants move from hedge finance to speculative and then Ponzi finance. This endogenous dynamic inevitably leads to points of fragility where confidence collapses. Kindleberger, in Manias, Panics, and Crashes, provides empirical illustration: markets swing from euphoria to distress, from boom to bust, before stability gradually returns and the cycle begins anew.

The chart below visually maps this emotional cycle, highlighting how investor psychology typically evolves from euphoria to panic and back to optimism.

Market emotions cycles graph

The most profitable opportunities often emerge during moments of maximum discomfort: recessions, crises, or market panics, when prices are depressed but fundamentals remain sound. As Sir John Templeton famously said, “The time of maximum pessimism is the best time to buy.”

However, acting against the crowd is far from easy. It requires not only analytical conviction but also emotional discipline, the ability to stay rational when everyone else reacts emotionally. This mental resilience is what separates long-term investors from speculators driven by short-term noise.

My opinion about this quote

I find Arnott’s statement particularly relevant, at a time when social media and short-term performance metrics dominate investor psychology. Platforms such as X (Twitter), Reddit, or TikTok amplify herd behavior by rewarding consensual views rather than conviction. True investment success requires patience, analytical thinking, and the ability to tolerate discomfort.

To me, this quote extends beyond finance: it reflects a mindset of resilience and independence, valuable in career decisions, entrepreneurship, and life in general, because growth rarely happens in comfort zones.

Why should you be interested in this post?

This quote provides a timeless reminder for students and young professionals: comfort is the enemy of progress.

The rise of AI-driven trading, quantitative strategies, and passive investing has made markets appear more predictable and automated. This can create new forms of comfort, a belief that algorithms or index funds can replace human judgment. However, Arnott’s message reminds us that critical thinking, curiosity are still needed to outperform others.

As Arnott’s principle suggests, growth rarely happens in comfort zones. Whether in markets, careers, or personal development, long-term success comes from embracing uncertainty intelligently, and finding opportunity where others see discomfort.

Useful Resources

Ackert, L. F., & Deaves, R. (2010). Behavioral Finance: Psychology, Decision-Making, and Markets. South-Western Cengage Learning.
Research Affiliates. (n.d.). Official Website.
Martin Capital. (2020). Long-Term Performance. Retrieved from https://www.martincapital.com/wp-content/uploads/2021/04/Long-Term-Performance-Presentation-2020.pdf

Business Books

Graham, B. (1949). The Intelligent Investor: A Book of Practical Counsel (Rev. ed.). Harper & Brothers.

Academic Articles

Arnott, R. D. (2003). The Fundamental Index: A Better Way to Invest. Financial Analysts Journal, 59.

Arnott, R. D. (2005). The Most Dangerous Equation. Financial Analysts Journal, 61.

Kahneman, D., & Tversky, A. (1979). Prospect Theory: An Analysis of Decision under Risk. Econometrica, 47(2), 263–291.

Markowitz, H. (1952). Portfolio Selection. The Journal of Finance(1), 7:77–91.

Classic Economic & Finance Works

Kindleberger, C. P. (1978). Manias, Panics, and Crashes: A History of Financial Crises. New York: Basic Books.

Minsky, H. P. (1992). The Financial Instability Hypothesis. Working Paper No. 74, Jerome Levy Economics Institute.

About the Author

This article was written in November 2025 by Hadrien PUCHE (ESSEC, Grande École Program, Master in Management – 2023–2027).

Valuing Aerospace & Defence: multiples—read through the backlog and the contract

November 23, 2025 by Emanuele BAROLI

In this article, Emanuele BAROLI (ESSEC Business School, Master in Finance (MiF), 2025–2027) explains how to value Aerospace & Defence (A&D) companies by combining the right multiples with a clear view of backlog quality and contract risk. The aim is a practical lens you can apply to comps (comparables), models, and deal work.

What “Aerospace & Defence” is (and how public companies are usually organized)

A&D is the cluster of businesses that design, certify, manufacture and support aircraft and spacecraft, military platforms and mission systems, plus the electronics, software and services that make them work in the field. Public companies tend to report along economically distinct pillars—platforms, defence electronics/sensors, space, and services—with some firms also disclosing a cyber arm. This segmentation matters because revenue recognition (delivery vs over-time), margin stability and cash conversion differ meaningfully across these buckets.

Two concrete blueprints help set the map. Boeing organizes reporting into Commercial Airplanes (BCA), Defense, Space & Security (BDS) and Global Services (BGS). Its notes clarify that most BCA revenue is recognized at the point of aircraft delivery, whereas a substantial portion of BDS and some BGS contracts are long-term and recognized over time.

Leonardo discloses six sectors—Helicopters, Defence Electronics & Security, Cyber & Security Solutions, Aircraft, Aerostructures and Space—and reports orders, backlog, revenues and EBITA by sector, a structure that lends itself naturally to “sum-of-the-parts (SOTP)” and mix analysis.

The multiples: why EV/EBIT is the workhorse in A&D

In A&D, EV/EBIT typically describes the economics better than EV/EBITDA (Enterprise Value / Earnings Before Interest, Taxes, Depreciation and Amortization). The reason is accounting, not fashion. Under IFRS (International Financial Reporting Standards), development costs that meet recognition criteria are often capitalized and then amortized, (qualifying development expenditure is recognised as an intangible asset and is therefore amortised rather than depreciated: depreciation is reserved for tangible property, plant and equipment, whereas amortisation is the systematic allocation of the cost of intangibles (such as capitalised development) over their useful lives). While under US GAAP (United States Generally Accepted Accounting Principles), development is more frequently expensed. Amortization is an economic cost of prior engineering and industrialization. EBITDA ignores it; EBIT does not. Comparing peers with different R&D capitalization policies on EV/EBITDA makes heavy capitalizers look artificially “cheap.”

Example:

In the 2024 financial year, Leonardo reports revenues of €17,763 million, EBITDA of €2,219 million and EBIT of €1,271 million. In management terms, EBITDA is obtained by adding back depreciation and amortisation to EBIT, which implies depreciation and amortisation of about €948 million (2,219 − 1,271). In formula form, EBITDA = EBIT + Depreciation + Amortisation = 1,271 + 948 ≈ 2,219. All figures are in millions of euros, with minor differences due to rounding. EBIT already includes the economic cost of depreciation and amortisation (including, for example, the amortisation of capitalised development costs), while EBITDA adds it back and therefore does not “see” this cost, which is why EV/EBIT often provides a more meaningful economic comparison than EV/EBITDA when analysing A&D companies like Leonardo.

A pocket example makes the point. Suppose revenue is 1,000 and cash operating costs are 800: EBITDA equals 200. Add 40 of industrial D&A and 100 of amortized, capitalized R&D: EBIT is 60. An 8× EV/EBITDA screen implies EV of 1,600; a 12× EV/EBIT anchor implies 720. The optics diverge because EBITDA suppresses an economically meaningful charge. In practice, anchor on EV/EBIT; if you must use EBITDA for market convention, normalize it by re-expensing capitalized R&D or by separating “maintenance-like” D&A from program amortization.

Always cross-check with EV/FCF (or FCF yield). In long-cycle industries, the acid test is whether booked economics pass through working capital and reach free cash once advances unwind, inventories build for rate ramps, milestones slip and remediation spending intrudes. EV/FCF disciplines any narrative derived from headline EBIT.

Backlog: quantity is the headline; quality drives value

Backlog is tomorrow’s revenue promise—but investors price what kind of promise it is. Start from a clean definition. Boeing defines total backlog as unsatisfied or partially satisfied performance obligations for which collection is probable and no customer-controlled contingencies remain; it excludes options, announced deals without definitive contracts, orders customers can unilaterally terminate, and unfunded government amounts.

Scale and coverage provide context, not answers. At 31 December 2024, Boeing reported $521.3bn of total backlog, comprising $498.8bn contractual and $22.5bn unobligated, while cautioning that delivery delays, production disruptions or “entry-into-service (EIS)” slippage can reduce backlog.

Leonardo closed 2024 with book-to-bill of ~1.2×, backlog above €44bn and roughly 2.5 years of production coverage—solid starting points if the mix is funded and executable.

Quality is the determinant. Judge the funded share (appropriated vs contingent), the margin mix by program, concentration by customer or platform, and—critically—executability against industrial capacity, certification gates and supplier health. A smaller, well-funded, high-margin and diversified backlog with credible executability justifies stronger multiples than a larger book that is lightly funded, concentrated or operationally brittle.

Revenue and Backlog diversification.

Source: Leonardo S.p.A. — FY 2024 Preliminary Results Presentation (PDF).

The chart shows the percentage distribution of Leonardo’s backlog in relation to its product portfolio, highlighting the weight of the various business lines and geographical areas.

Leonardo DRS Backlog.

Source: Leonardo DRS — Q3 2024 results article (StockStory).

Over time, the chart shows new orders increasingly outpacing those delivered: after an initial phase of balance (stable backlog), from late 2022 incoming orders rise and expand the order book. The jump between Q3 and Q4 2023 points to one or more major contracts, while in 2024 the order flow remains strong enough to keep the backlog at high levels.

Contract risk: the paper your revenue sits on

Two nominally similar contracts can encode very different economics. Firm-fixed-price development places cost risk squarely on the contractor; technical uncertainty and learning-curve effects can generate catch-up losses and re-time cash. Cost-type contracts reimburse allowable costs plus a fee, limiting downside but capping upside and typically improving visibility. Milestone/performance-based structures align incentives but increase timing volatility. IDIQ/framework arrangements set a ceiling but do not become firm until orders are called.

For valuation, portfolio contract mix is a prior on both the dispersion of outcomes and the discount you apply: heavy fixed-price development warrants more conservative multiples and scenario ranges; cost-type and service-heavy portfolios support tighter distributions of cash outcomes.

Execution and supply chain: where backlog becomes (or does not become) cash

A&D manufacturing is materials- and certification-intensive. Boeing highlights reliance on aluminium, titanium and composites, and the prevalence of sole-source components whose qualification can take a year or more; failure of suppliers to meet standards or schedules can affect quality, deliveries and program profitability.

Airworthiness oversight also constrains timing: in 2024 the FAA communicated it would not approve 737 production-rate increases beyond 38/month or additional lines until quality and safety standards are met.

In models, these realities alter revenue phasing, inventory (often rising when rates slip), the sustainability of customer advances, and, where remediation is required, the cadence of capex and engineering spend. The practical consequence is straightforward: multiples are a consequence of cash reliability. EV/EBIT (or normalized EBITDA) captures the economic load; backlog quality and contract mix explain whether those economics are repeatable; factory and supply chain determine the when of revenue and free cash.

Typical business mix—why it matters for valuation

Commercial platforms (e.g., BCA) recognize revenue largely at delivery, with program accounting and rate decisions driving cash swings; 2024 disclosures explicitly tie BCA results to deliveries, rate disruptions and quality actions.

Defence and space portfolios (e.g., BDS; Leonardo Defence Electronics & Space) contain more over-time revenue and often greater visibility when cost-type work dominates, yet fixed-price development can be painful, as the program notes above illustrate.

Services/MRO and training (e.g., BGS; Leonardo’s cyber and service activities) usually provide steadier margins and higher cash conversion, acting as stabilizers in a SOTP.

A compact playbook you can actually use

Start with EV/EBIT—or, if you must use EBITDA, normalize for capitalized development. Then check EV/FCF to interrogate cash conversion through advances, inventory and milestone timing.

Qualify the order book before you underwrite it: insist on firm definitions (exclude options and unilateral cancellations), isolate the funded share, examine program-level margins and concentration, and test executability against rate plans, certification gates and supplier health. Boeing’s split between contractual ($498.8bn) and unobligated ($22.5bn) backlog is a clean template; Leonardo’s book-to-bill (~1.2×) and ~2.5-year coverage are strong if the mix converts.

Read the contract. Fixed-price development deserves a discount for volatility; cost-type merits a premium for visibility; IDIQ ceilings are not orders until called. Boeing’s fixed-price development programs provide a cautionary case. Underwrite execution with a materials and supplier map (Al/Ti/composites; sole-source exposure) and with regulatory gates (FAA/EASA) that can cap rates irrespective of demand.

Why should I be interested in this post?

As an ESSEC finance student focused on valuation and transactions, you will frequently compare A&D peers and screen targets. This guide helps you avoid EBITDA traps, read backlog quality, and translate contract structures into realistic cash and multiple assumptions that travel well into comps, equity research, and M&A models.

Useful resources

The Boeing Company — Official website

Leonardo S.p.A. — Official website

Leonardo DRS — Q3 2024 results article (StockStory)

Leonardo S.p.A. — FY 2024 Preliminary Results Presentation (PDF)

Leonardo S.p.A. — Integrated Annual Report 2024 (PDF)

The Boeing Company — Form 10-K (Year Ended Dec 31, 2024) — EDGAR

About the author

The article was written in November 2025 by Emanuele BAROLI (ESSEC Business School, Master in Finance (MiF), 2025–2027).

My internship experience as an analyst assistant at China Bond Rating

November 23, 2025 by Tianyi WANG

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In this article, Tianyi WANG (ESSEC Business School, Global Bachelor in Business Administration (GBBA), 2022-2026) shares her professional experience as an Analyst Assistant at China Bond Rating in Beijing.

About the company

China Bond Rating Co., Ltd. (CBR), established in 2010 with a registered capital of RMB 50 million, has grown into one of the core credit rating institutions in China’s fixed-income market. The company employs around 280 professionals and operates under an “investors-pay” model designed to enhance its independence and objectivity. Over the years, it has built a comprehensive analytical framework covering macroeconomic research, sectoral risk evaluation, credit modelling, structured finance, and green finance.

Logo of China Bond Rating .

Source: the company.

CBR provides a wide range of services including issuer credit ratings, bond and ABS credit assessments, credit-risk-based valuation models, market pricing services, and risk monitoring tools. Its clients span local governments, state-owned enterprises, financial institutions, corporates across industries, and institutional investors in the interbank bond market. According to regulatory disclosures, the company issued over 1,180 new credit ratings in a recent year, covering more than RMB 34 trillion in bond issuance. These credit opinions are widely used for investment decisions, regulatory compliance, and bond pricing, making the firm a key contributor to transparency and information efficiency in China’s fixed-income ecosystem.

As part of its methodology, China Bond Rating uses a structured rating grid similar to international rating agencies, ranging from high-grade ratings (AAA, AA, A) to speculative-grade categories (BBB, BB, B, etc.). Credit ratings help investors assess default risk, determine appropriate yield spreads, and monitor changes in an issuer’s financial strength over time.

Grid of China Bond Rating.

Source: the company.

My internship

From August to November 2023, I worked as an Analyst Assistant at the Investment Service Department. The experience allowed me to gain deep exposure to China’s local government financing system and understand how professional credit evaluations are produced from both data and policy perspectives.

My missions

My primary mission was to support the team in building and maintaining credit evaluation databases for local governments and urban investment enterprises. I conducted detailed research on more than 130 companies across the Sichuan and Chongqing regions, analyzing their business structures, investment pipelines, guarantee arrangements, and key financial items. I helped calculate funding gaps and conducted preliminary assessments of repayment risk.

I also created and updated database templates using Excel, SQL, and internal analytical tools to maintain credit evaluation data for local governments, urban investment enterprises, and bond issuance activities. This included compiling statistics on local government bonds and special refinancing bond issuances.

Another major part of my mission was to verify and cross-check corporate operational and financial data to support fundamental research. I helped review over 60 debt financing reports and credit analysis documents, ensuring accuracy and consistency across key metrics. Through this work, I learned how rating agencies ensure data reliability before forming credit opinions.

Required skills and knowledge

This internship required strong analytical thinking, attention to detail, and the ability to manage large volumes of financial data. Hard skills such as Excel modeling, SQL queries, statistical analysis, and familiarity with financial statements were essential. Equally important were soft skills such as communication, logical reasoning, and the ability to organize information from inconsistent disclosures.

Given the diversity of local government financing practices across regions, I needed to quickly understand differences in fiscal structures, reporting standards, and project pipelines. The role required not only technical ability but also a policy-oriented mindset to interpret the implications of debt levels, off-balance-sheet risks, and industry trends.

What I learned

Through the database reconstruction and indicator standardization work, I gained a systematic understanding of credit risk assessment and the financial mechanisms behind China’s local government financing vehicles (LGFVs). I developed the ability to assess repayment capacity based on funding gaps, cash flow projections, and guarantee relationships.

My contribution helped improve the efficiency of data extraction and cross-validation, significantly reducing the time required for report preparation. During the internship, I also discovered several enterprises exhibiting liquidity pressure and implicit debt risks. These findings supported the final credit rating conclusions.

Overall, this internship strengthened my skills in data management, logical analysis, and risk identification. It also deepened my understanding of how rating agencies support bond market stability through standardized evaluation and high-quality information disclosure.

Financial concepts related to my internship

I present below three financial concepts related to my internship: credit risk assessment, local government implicit debt, and refinancing pressure.

Credit risk assessment

Credit risk assessment is the foundation of the bond market. My work involved analyzing financial ratios, debt structures, liquidity indicators, and funding gaps to determine whether an issuer has adequate repayment capacity. These assessments directly influence credit rating outcomes and bond pricing.

Local government implicit debt

Urban investment companies often carry implicit debt obligations on behalf of local governments. Understanding the link between fiscal revenues, government guarantees, and off-balance-sheet debt was crucial to evaluating the financial sustainability of LGFVs.

Refinancing and liquidity pressure

Many LGFV issuers face refinancing pressure as their short-term borrowings accumulate. By tracking debt maturities and analyzing cash flow projections, I learned how rating agencies evaluate the risk of default and identify early signals of liquidity stress.

Why should I be interested in this post?

This post is relevant for students interested in fixed-income research, credit analysis, bond markets, or public finance in China. Working in a rating agency provides exposure to the fundamentals behind bond pricing, the interaction between public policy and financial markets, and the analytical rigor required to evaluate complex debt structures.

Useful resources

China Bond official website

China Central Depository & Clearing Co., Ltd.

About the author

The article was written in November 2025 by Tianyi WANG (ESSEC Business School, Global Bachelor in Business Administration (GBBA), 2022-2026).

Religious imagery in finance: analysis of the book ‘Money’ by Émile Zola

November 25, 2025November 22, 2025 by William LONGIN

In this article, William LONGIN (Sorbonne School of Economics, Master in Money Banking Finance Insurance, 2024-2026) discusses the religious imagery in finance contained in the book ‘Money’ (L’Argent) by Émile Zola.

L’Argent

Published in 1891, L’Argent (Money) is a book written by Émile Zola a 19th-century French novelist and journalist, known for founding the naturalist literary movement and for his bold defense of justice in the Dreyfus Affair. The book ‘Money’ tells the story of Aristide Saccard, a Parisian banker whose risky projects lead to a boom and a crash of his bank called “The Universal Bank” on the Paris Stock Exchange. By using biblical references, metaphors of faith, and symbolism, the author shows how wealth is deeply intertwined with religion at the time of the Second Empire in France (1852-1870). Throughout the novel, the author conceptualizes “faith” as a value-generating mechanism, as shown by religious symbolism within financial institutions.

First edition of L’Argent by Émile Zola (1891).
First edition of L’Argent by Émile Zola
Source: Bibilothèque Charpentier (Paris).

Faith creates value

In financial markets the law of supply and demand is what drives prices. The demand is driven by what market participants think an asset will bring back in terms of cash flows in the future. This is seen with the word “credit” that comes from the Latin word “credo” showing how belief is central in finance. This belief is uncertain and ungraspable as financial markets can be similar to the omnipotence of God. Zola illustrates this comparison by mixing liturgic elements with finance. In chapter 10 of the book, traders have blind faith in the markets ability to deliver and produce “miracles”. Zola compares stock-market belief with an irrational religion, blind to the signs of a crash.

“…the faithful believed in a rise as they believed in the good Lord.” (chapter 10)

In the General Theory of Keynes, markets are described as being influenced by “animal spirits” through instincts, moods, and confidence that drive people to invest or hold back, rather than pure logic. Similarly, Émile Zola adds a religious dimension to Keynes argument as the characters believe in financial miracles, almost presenting the stock market as the center of a religion of its own.

“…he searched to know by what fault God had not allowed him to bring to fruition the great Catholic bank destined to transform modern society, that treasure of the Holy Sepulchre which would restore a kingdom to the Pope…” (chapter 12)

The main character, Saccard, blames God rather than his own actions, evading moral responsibility for how he handled his clients’ money and shifting guilt onto a higher power. The “sacralized” project of the Universal bank tied to the Holy Sepulchre and the papacy pushes the project as a catholic investment. By intertwining the Holy Sepulchre’s “treasure” with banking, Zola blurs the line between crusade and commerce.

Banks and stock exchanges: religious buildings

Throughout the book the stock market is compared to a church. In the first chapter a comparison of the staircase of the stock exchange is made comparing the level of usage of the stairs saying the they were “more worn than the thresholds of old churches.” The stock exchange is later described “as a four-pointed star”. Zola ironically sacralizes the trading pit (la corbeille in French) comparing it to a modern temple where people worship capital.

Paris Stock Exchange building: Palais Brongniart in the 19th century.

Source: Bourse de Paris archives.

La corbeille in the Paris Stock Exchange.
La corbeille in the Paris Stock Exchange
Source: Bourse de Paris archives.

Zola hints that modern hubris is architectural. In chapter 5, the board room of the Universal Bank is compared to a “chapel”. And later on, in chapter 8, the Universal Bank’s headquarters turns into a temple, “part temple, part café-concert”. Zola uses liturgical vocabulary to show the sacralization of finance. Through décor, ritual, and titles, the bank borrows sacred codes of respectability and vice versa, the church becomes a place to pray for gains and a better future. This logic is echoed in the construction of the J.P. Morgan building at 23 Wall Street in New York, whose early-twentieth-century, temple-like mass of stone, stripped of ornament and pierced by only a few windows, presents the bank as an inviolable shrine to capital, a solid and reassuring “sanctuary” for investors’ money. Like Zola’s Universal Bank, such architecture turns finance into a quasi-religious experience: a teller’s counter that resembles an altar or chapel is reassuring for its depositors.

People in finance

Zola presents leading financiers as disciplined to the point of asceticism (a way of living that deliberately avoids physical comforts and pleasures). The character of Gundermann is a powerful Jewish banker who embodies cold, rational, and stable finance serving as Saccard’s rival and the realistic counterpoint to his reckless speculation. He lives “a galley-slave life,” suggesting monk-like self-denial but at the same time living in a luxurious environment. His rapport to money is religious as seen in chapter 5, money is handled with “clerical discretion”.

Another striking aspect of L’Argent is the way Zola shows winners on the market being treated almost like superior beings. Successful financiers are not just clever speculators; they are revered as if they possessed a special, mystical intelligence. Early in the novel, Gundermann is described as an object of worship, with “crowds prostrated around the god” (chapter 1).

Portraits at the Paris Bourse
Portraits à la Bourse de Paris par Edgar Degas
Source: Edgard Degas.

Saccard, too, embraces this quasi-divine status. He casts himself as a savior of society rather than a mere businessman. “We are here to save everything,” he proclaims (chapter 5), boldly taking over the Church’s traditional mission of redemption and applying it to financial speculation. Zola reinforces this confusion of sacred and economic power through moments of visionary revelation through the idea of “The Universal Bank” appears to Saccard “as if in letters of fire,” as though granted by some higher power rather than born of greed and ambition. In this way, Zola suggests that modern capitalism creates its own gods, prophets, and miracles, transforming financial success into a new form of worship.

The figure below depicts the stock price trajectory of “The Universal Bank” as presented in the book. The horizontal axis reflects time, structured according to the chapters providing information on price movements, since Zola does not specify explicit calendar dates.

Evolution of the stock price of The Universal Bank shares.

Source: the author.

“What about today”

Today’s western civilization is much less religious than before with about only 50% of the French population claiming to believe in a religion where as it was once a majority during Émile Zola’s time. While Catholic credit unions once existed, Christian finance has mostly been replaced by ESG investing. The 2015 launch of the S&P 500 Catholic Values Index sparked some attention, but French banks rarely use religious symbolism.

In contrast, the U.S. has a well-developed Christian finance market. Firms like Knights of Columbus and Timothy Plan openly market faith-based portfolios aligned with biblical principles, often referencing scripture and using religious imagery. Products screen out morally objectionable sectors and promote “biblically aligned” companies, with ETFs like BIBL and PRAY leading the trend.

Related financial concepts

Price vs Value

In L’Argent, Zola portrays a world where financial speculation takes on a religious fervor, blurring the line between what something costs and what it is worth. This distinction echoes the financial concept of price versus value. The price reflects what the market is willing to pay at a moment in time, while value reflects the underlying fundamentals such as assets or cash flows. In the book, characters often worship price movements as if they were divine signs, forgetting that markets can be irrational and driven by emotion rather than reality. This parallels how modern investors sometimes chase rising prices without questioning intrinsic value, illustrating the timelessness of Zola’s critique.

Discounted Cash Flow (DCF) model

A DCF model seeks to calculate the true value of an asset by estimating its future cash flows and discounting them back to the present. This rational, analytical approach contrasts sharply with the speculative excesses described in L’Argent, where anticipated gains and promised fortunes overshadow the analysis using real economic output. In a sense, a DCF is the opposite of the “faith-based finance” depicted by Zola: instead of belief, charisma, or collective enthusiasm, it relies on measurable expectations and the time value of money. If Zola’s financiers had applied something like a modern DCF approach, their illusions of endless prosperity would likely have dissolved, revealing how fragile and unsupported their dreams truly were.

Zola’s narrative anticipates key ideas from behavioral economics, which studies how human biases systematically influence financial decisions. In L’Argent, investors fall prey to herd behavior, overconfidence, illusion of control, and the “narrative fallacy,” believing in grand stories of progress and fortune. These behaviors mirror well-documented cognitive biases that affect markets today, bubbles, panics, and irrational exuberance. Zola intuitively captures how money can become a quasi-religious force, shaping collective psychology and pushing individuals to act against their rational interests. Behavioral economics formalizes these observations, showing that markets are not purely logical systems but human and emotional ones, just as Zola described.

In L’Argent, Zola forges a powerful equivalence between religion and finance to show how belief, more than metal or marble, mints value. By sacralizing the Exchange, the bank, and the financier himself, he renders capitalism’s success contingent on liturgy: architecture that reassures, rituals that discipline, and a priesthood of leaders who promise salvation through profit. The crowd’s devotions inflate prices the leader’s “revelations” and, as in any cult of miracles, the crash arrives as a kind of failed prophecy, exposing how the same belief that creates wealth can just as quickly unmake it.

Why should you be interested in this post?

By linking Zola’s 19^th-century novel to today’s financial concepts, from credit and bubbles to ethical and faith-based investing, it reveals how belief still drives markets as much as numbers do.

Useful resources

Articles and books

Keynes J.M. (1936) The General Theory of Employment, Interest, and Money, London: Macmillan (reprinted 2007).

Legoyt A. (1871-1872) La population française d’après le recensement de 1866, Journal de la Société Statistique de Paris , 12-13: 1-10.

Zola E. (1891) L’argent, Bibliothèque Charpentier, Paris.

SimTrade

SimTrade course Financial analysis

Others

Palais Brogniart

About the author

The article was written in November 2025 by William LONGIN (Sorbonne School of Economics, Master in Money Banking Finance Insurance, 2024-2026)

My internship experience at BearingPoint – Finance & Risk Analyst

November 22, 2025 by Julien MAUROY

shares his professional experience as a Finance & Risk Analyst at Bearingpoint.

Overview of BearingPoint

BearingPoint is a management and technology consulting firm founded in 1997, with European origins and international reach. The firm operates in more than 20 countries and has over 6,000 employees. It supports large companies, financial institutions and public organizations in their strategic, financial and digital transformation projects.

The firm’s unique selling point is its ability to combine strategic thinking with operational implementation. Its consultants are involved throughout the entire process, from defining the strategy to its concrete implementation. BearingPoint also stands out for its strong entrepreneurial culture, based on collaboration, knowledge sharing and continuous skills development.

Logo of BearingPoint.

Source: the company.

My experience and service

I joined BearingPoint France as an intern analyst in the Finance & Risk department. I completed this internship during the first part of my gap year for a period of six months, from September 2024 to February 2025.

The Finance & Risk department supports the finance departments of large international groups (both private and public) in their transformation projects: optimizing management processes, performance management, digitization of financial tools and risk control. I had the opportunity to participate in a variety of assignments, combining financial analysis and strategic analysis. I worked for a company in the energy sector and had the opportunity to participate in the drafting of two commercial proposals.

As part of my client assignment, I worked in collaboration with a junior consultant, a consultant and a senior manager. I participated in all meetings with the client, contributed to the drafting of various deliverables, mainly in PowerPoint and Excel, produced reports and acted as PMO for effective project management. More specifically, I had the opportunity to gain detailed insight into the organization of a large group’s finance department and to understand the economic challenges and structure involved in the financial management of such an organization.

This assignment had a real impact on the company’s financial management in terms of both the budget and projections and actual results. I was able to interact directly with the finance departments and sometimes with members of executive committees, in a stimulating environment.

Explanation of the hierarchy

At BearingPoint, positions are organized around a clear hierarchy:

Analyst/Junior Consultant: participates in analyses, preparing deliverables and structuring data.
Consultant: manages part of the project, sometimes supervises a junior consultant and contributes to client relations.
Senior Consultant: provides technical or sector-specific expertise and leads certain assignments
Manager: coordinates the team, ensures the quality of deliverables and client satisfaction, and begins to work on several assignments at the same time
Senior Manager: a position between operations and assignment management, supporting consultants on assignments and with clients, leading project and steering committees, and structuring the deliverables plan
Director: strategic vision, supports senior managers in client relations and specialises in a sub-sector of the service (e.g. in public institutions in the Finance and Risk department)
Partner: designs the development strategy, supports and manages a portfolio of clients and contacts, defines the firm’s vision and sectors/areas of development

This hierarchical model provides a highly educational learning environment. Each level of responsibility represents a step forward in one’s career progression.

As a trainee analyst, I was able to learn directly from experienced consultants, understand the logic and structure of a project, and observe how managers structure strategic thinking. Consulting thus offers an environment where learning is continuous and skills develop rapidly.

Required skills and knowledge

On a technical level, the assignments I carried out strengthened my advanced mastery of tools such as PowerPoint and Excel for structuring models and analysing complex data. In addition, understanding budgetary processes, forecasting cycles and key financial indicators (KPIs, margins, cash flow) was essential for me to be able to work collaboratively with my teams on assignments. On a personal level, the consulting environment requires a high degree of adaptability, whether in client meetings, when encountering difficulties, or in keeping up with the fast pace of work. Rigour and attention to detail were also essential, as they are integral to the quality of the deliverables expected and the accuracy of the analyses performed. Finally, teamwork is central to BearingPoint. I strengthened my communication skills and my ability to be proactive and solution-oriented. These constant exchanges with my team members were a driving force for learning and progress.

What I learnt from this experience

This internship was particularly educational. I learned how to:

Structure my thinking and present analyses in a clear and concise manner (analysis of complex financial and quantitative models),
Work as part of a team in a demanding and intense environment where collaboration is essential,
Develop the analytical rigor needed to understand a company’s financial performance,
Finally, translate complex issues into concrete, quantifiable solutions tailored to the client.

Beyond the technical skills I developed, this experience confirmed my interest in financial strategy and consulting. It is a field that I found fascinating, where reflection, adaptation and a deep understanding of business issues are complementary.

Financial and Business concepts related to my internship

Here are three financial and business concepts related to my internship experience at Bearingpoint: financial analysis, writing commercial proposals and pricing assignments, and the strategic and analytical approach to barriers to financial performance for a company.

Detailed financial analysis by cost category

During my internship, I worked on a project that required me to examine in detail the cost structure of the company we were supporting. The analysis was based not only on its financial statements but also on those of its SPVs and the distribution of costs throughout the entire structure. It was necessary to distinguish between support and operational items by linking them to the appropriate cost centre to ensure that the allocation of costs was fair. This work required a deep understanding of the employees’ roles, as well as the financial challenges of each financial structure. One of the challenges was therefore to restructure the allocation of the company’s costs to ensure the right balance within the structures and enable them to grow without running out of resources.

Commercial proposals and pricing for assignments

I have had the opportunity to participate in the drafting of commercial proposals. This is a demanding task that is carried out in collaboration with the departments involved in the tender process. It is often an intense exercise, given the tight deadlines and the complexity of creating a convincing response that is tailored to the company. It is also through responses to calls for tenders that we can see the financial structure of a consulting assignment. Depending on the duration and the people who will be assigned to work on the assignment, there will be a price (number of people per grade x the FTE price per grade x the duration of the assignment). An FTE is a full-time equivalent, i.e. the price of one person working for one day.

Strategic approach and barriers to financial performance

During an assignment, I had the opportunity to work on analysing a company’s financial performance. The task was to identify cost items but also to find ways to optimise certain costs, facilitate access to information and improve understanding of revenues within the company. This involved both internal and external work with a strategic vision. Financial management is therefore a key factor in preparing a solid budget and setting targets that reflect the current situation. I had the opportunity to work on these elements and support the teams in implementing a financial management tool.

Why should I be interested in this post?

This position is a great opportunity to discover several sectors of activity while specialising in corporate finance. Consulting assignments allow you to work with a company and learn about its sector, strengths and weaknesses. This position is also challenging in a dynamic environment. You will be very exposed, working directly with the client, which is very educational but also demanding. It is a great way to learn from extremely competent and motivated teams.

Useful resources

BearingPoint

About the author

The article was written in November 2025 by Julien MAUROY (ESSEC Business School, Global Bachelor in Business Administration (GBBA), 2021-2025).

My experience as a financial analysis assistant in China’s securities market

November 22, 2025November 22, 2025 by Tianyi WANG

In this article, Tianyi WANG (ESSEC Business School, Global Bachelor in Business Administration (GBBA), 2022-2026) shares her professional experience as a Financial Analysis Assistant at a leading securities firm in China.

About the company

The securities company where I completed my internship is one of China’s leading investment banks and brokerage firms. Founded in 2005, the CSC (China Securities Company) has expanded over the past two decades. In 2023, the firm reported total operating revenue of ¥232.43 billion, with a net profit of ¥70.34 billion, illustrating its strong financial scale. It operates across a broad range of business lines — equities, fixed income, asset management, wealth management, and structured and derivative products. Its own proprietary trading business generated ¥68.42 billion, a year-on-year increase of ~50.96%, showing the firm’s flexibility and strength in capital markets. On its balance sheet, the firm had total assets of ¥5,227.5 billion at the end of 2023 and a net shareholders’ equity of about ¥975 billion. Its return on equity (ROE) was 8.59%, reflecting relatively efficient use of capital.

Logo of China Securities Company (CSC).

Source: the company.

Within the organization, the Financial Innovation Department occupies a strategic and highly cross-functional position. It integrates market research, product development, and investor education, acting as a bridge between frontline market activities and client engagement. The department monitors market trends daily and collaborates with trading desks to design and structure a broad range of innovative products—including equity-linked notes, autocallable structures, barrier options, total-return swaps, and market-linked wealth-management products. These solutions are tailored to the needs of diverse client groups, ranging from institutional investors such as mutual funds, hedge funds, insurance companies, and corporate treasuries to high-net-worth and retail investors seeking yield-enhancing or risk-controlled strategies. By translating complex market movements into accessible insights, preparing product explanations, and communicating risk–return characteristics, the department ensures that financial innovations are both technically sound and aligned with client objectives.

My internship

My internship allowed me to gain hands-on exposure to China’s fast-evolving securities markets. Working within the Financial Innovation Department, I engaged closely with market data analysis, product evaluation, and investor communication. The role helped me understand how market information shapes investment decisions and how securities firms design and present financial products to clients.

My missions

During my internship at the Financial Innovation Department, my missions covered a wide range of tasks across market research, product analysis, data management, and investor education. These responsibilities gave me a comprehensive understanding of how securities firms operate and respond to market developments.

A core part of my work involved daily market tracking. Using Bloomberg (a global financial data and analytics platform that provides real-time market data, news, trading tools, and research used by investment banks, asset managers and traders worldwide) and Wind (China’s leading financial data platform which offers comprehensive domestic market data, company financials and researches that widely used by Chinese securities firms, asset managers and regulators), I collected and analyzed data from the A-share market (China’s main domestic stock market, where shares of Chinese companies are traded in RMB and mainly listed in Shanghai and Shenzhen), the SSE Composite Index (The main stock index of the Shanghai Stock Exchange, tracking all stocks listed in Shanghai to show how the Shanghai market is performing overall), the SZSE Component Index (A major index on the Shenzhen Stock Exchange, made up of 500 representative Shenzhen-listed companies, used to show the performance of the Shenzhen market), and major ETFs. This required monitoring price movements, macro policy announcements, sector rotations, and liquidity patterns to support internal decision-making. I also assisted in building and maintaining internal market-tracking templates, which later became standard references for training materials and product discussions.

Beyond market research, I supported the team in evaluating and managing a broad set of financial products, including Snowball derivatives, fixed income instruments, trust products, and structured products linked to the CSI 500 Index (A major Chinese stock index that tracks 500 mid-cap companies listed on the Shanghai and Shenzhen stock exchanges. It reflects the performance of China’s mid-sized, fast-growing firms and is widely used as a benchmark for mutual funds, ETFs, and quantitative strategies). My tasks ranged from conducting payoff simulations and reviewing index-linked behavior to preparing model inputs and performing preliminary return estimations. Through this process, I learned how structured products are designed, priced, and monitored under different market conditions.

Another important part of my mission involved contributing to investor training and communication. I prepared financial product training materials, coordinated with private equity and trust companies, and helped explain how market trends affect product performance and applications. This strengthened my ability to translate complex market concepts into accessible explanations for clients.

Additionally, I compiled daily market news, summarized major macro and microeconomic developments, and drafted weekly livestream scripts for investors. This required identifying the most relevant policy signals, analyzing capital flows, and highlighting potential investment opportunities or risks. Over time, I learned how to condense large volumes of information into concise and actionable insights.

Together, these missions enabled me to contribute meaningfully to team projects while building a holistic understanding of the relationship between market dynamics, product structuring, and investor behavior in China’s securities market.

Required skills and knowledge

This internship required strong quantitative and analytical skills, as well as the ability to process and interpret complex financial information. Proficiency in Bloomberg and Wind was essential for collecting, filtering, and analyzing real-time market data. Knowledge of derivatives, structured products, and fixed income instruments was crucial for evaluating product behavior and understanding risk-return trade-offs.

Soft skills were equally important. Effective communication allowed me to collaborate with various stakeholders, including private equity firms, trust companies, and internal product teams. The ability to present market trends clearly and concisely was vital when preparing investor-facing materials. Adaptability and curiosity helped me navigate the fast-paced environment and quickly grasp new market developments.

What I learned

This internship deepened my practical understanding of China’s capital markets and strengthened my ability to analyze how changes in interest rates, volatility, and equity indices influence the pricing, risk, and returns of structured and derivative products. I learned how securities firms structure financial products, evaluate market conditions, and translate market developments into clear investment insights for clients.

I gained substantial hands-on experience using market-tracking tools such as Bloomberg and Wind to monitor equity indices, interest-rate movements, and macroeconomic indicators. This involved cleaning and analyzing data sets, comparing sector performance, and interpreting policy announcements—such as PBOC (People’s Bank of China) rate adjustments or new regulatory guidelines—to understand their market impact. I also learned to evaluate structured products by breaking down their payoff mechanisms, running scenario analyses (e.g., changes in volatility or index levels), and assessing how underlying indices like the CSI 300 or CSI 500 affect expected returns and risk exposure..

Perhaps most importantly, I learned how investor sentiment, liquidity conditions, and macroeconomic policies collectively drive market trends. This holistic perspective strengthened my interest in pursuing further professional opportunities in investment research and product structuring.

Financial concepts related to my internship

Below, I present three financial concepts that are closely connected to my internship experience: market microstructure, derivative payoff structures, and investor behavior.

Market microstructure

Understanding market microstructure—how prices are formed, how information is incorporated, and how liquidity varies across instruments—was essential for interpreting daily index and ETF movements. This concept directly informed my market analyses and helped me anticipate how policy announcements might affect trading behavior.

Derivative payoff structures

Products such as Snowball derivatives or CSI 500–linked structures rely on complex payoff mechanisms that depend on volatility, barriers, and index paths. My internship taught me how these products generate returns, how risks are embedded, and how product suitability changes under different market environments.

Investor behavior and sentiment

Investor sentiment plays a critical role in shaping short-term market movements. By preparing market commentary and livestream scripts, I observed how expectations, policy interpretations, and risk attitudes influence trading flows. These insights helped me understand the psychological dimension of financial markets.

Why should I be interested in this post?

This post is particularly relevant for students aspiring to work in financial markets, investment research, or product structuring. The internship offers hands-on exposure to real-time market analysis, derivative product evaluation, and investor communication—core competencies for many finance careers. It also demonstrates how foundational knowledge from coursework can be applied directly to professional settings.

Useful resources

China Securities Company

China Securities Index Co., Ltd.

Shanghai Stock Exchange

Shenzhen Stock Exchange

China Securities Regulatory Commission

About the author

The article was written in November 2025 by Tianyi WANG (ESSEC Business School, Global Bachelor in Business Administration (GBBA), 2022-2026).

My experience as a Working Student in Infrastructure Investment Inhouse Consulting at Munich Re

November 21, 2025 by Nicolas SCHULZ-SEMBTEN

In this article, Nicolas SCHULZ-SEMBTEN (ESSEC Business School, Global Bachelor in Business Administration (GBBA), Exchange semester 2025) shares his professional experience as an apprentice and working student in Infrastructure Investment Inhouse Consulting at Munich Re.

About the company

Munich Re is one of the world’s leading reinsurance groups, headquartered in Munich, Germany. With around 44,000 employees and annual revenues of approximately EUR 60–70 billion, Munich Re is comparable in size to other major global reinsurers, including Swiss Re, Hannover Re, SCOR and Everest Re. Munich Re operates worldwide in the fields of reinsurance, primary insurance (mainly through its ERGO brand), and asset management.

The core of Munich Re’s business model is reinsurance: primary insurers transfer part of their risks and premiums to Munich Re, enabling them to increase their capacity and protect themselves against large or catastrophic losses. Premiums are received upfront, while claims are often paid out years later. The resulting ‘float’ is invested in financial markets by the group’s asset management division, which manages a diversified, multi-billion-euro portfolio including bonds, equities, and alternative assets such as real estate and infrastructure. In this way, Munich Re combines underwriting profit from insurance and reinsurance with investment income from its global portfolio.

Logo of Munich Re.

Source: the company.

Within the group, I worked in the Infrastructure Investment Inhouse Consulting team. The team’s remit includes supporting Munich Re and its asset management arm MEAG (Munich Re’s asset management company) in analysing, structuring and monitoring infrastructure investments. These investments span a range of sectors, including renewable energy (solar and wind), digital infrastructure (data centers and fiber networks) and real estate-related projects, among many others. Acting as strategic advisors within the investment process, the team combines financial modelling, risk analysis, due diligence and ESG (Environmental, Social and Governance) assessments into a unified investment framework for MEAG and Munich Re.

My internship

I first joined Munich Re as an Insurance and Finance apprentice, later continuing as a working student within the Infrastructure Investment Inhouse Consulting team. Over the course of two years, I was involved in various infrastructure transactions and portfolio projects. While my role mainly involved ESG analysis, I also supported the financial and risk analysis of new investments.

My missions

A central part of my role involved conducting ESG analysis. For each potential or existing infrastructure investment, our team assessed the environmental, social and governance risks and opportunities involved. I was responsible for maintaining and developing an ESG questionnaire in Excel, which we sent to project sponsors, operators and asset managers. They provided detailed information on topics such as carbon footprint, energy efficiency, biodiversity, health and safety, community impact, governance structures, and compliance.

Once the questionnaire had been completed, I consolidated and verified the data, clarified any outstanding issues with the counterparties, and converted the qualitative responses into quantitative ESG scores. These scores were then linked to frameworks such as the EU Taxonomy (the European Union’s classification system for environmentally sustainable economic activities). I supported the preparation of ESG scorecards and summaries that fed into the overall investment recommendation. Although I did not make any decisions independently, my analyses were an important input for the team.

Required skills and knowledge

This position required a combination of hard and soft skills. In terms of technical skills, a solid grasp of Excel was essential for handling large datasets, building financial models, and automating parts of the ESG questionnaire. A good grasp of fundamental corporate finance principles such as discounted cash flow, IRR, WACC and leverage was necessary to comprehend and contribute to the valuation process. Knowledge of sustainability regulations (EU Taxonomy, SFDR) and ESG ratings helped me interpret data and understand the importance of certain indicators.

On the soft skills side, attention to detail and a structured approach to work were crucial, particularly when validating ESG data or checking models. Strong communication skills were also important: I often had to coordinate with colleagues from different departments and clarify queries with external partners. Finally, a proactive and curious approach helped me quickly learn about new sectors, such as how a data centre operates or how the revenue of a wind farm depends on weather conditions and power prices.

What I learned

Through this experience, I learned how institutional investors evaluate infrastructure assets from financial and ESG perspectives. I gained practical insight into modelling long-term cash flows, identifying and quantifying risks, and structuring the decision-making process of investment committees. I also realised how central ESG has become to investment decisions, with topics such as carbon emissions, biodiversity and social impact now being systematically integrated into risk-return analysis.

Personally, I became more confident when working with complex Excel models and presenting my results to senior colleagues. I learned how to balance recurring tasks, such as updating ESG questionnaires, with project-based work. Ultimately, this internship has confirmed my interest in finance, infrastructure, and sustainable investing, motivating me to pursue a career in investment-related roles, such as in infrastructure or private equity.

Financial and economic concepts related to my internship

Below, I present two financial and economic concepts related to my internship: risk-return profile of investments and portfolio diversification, and ESG integration in investment decisions.

Risk-return profile of investments and portfolio diversification

Institutional investors such as Munich Re consider infrastructure not only as individual projects, but also as part of a wider portfolio. Infrastructure typically offers long-term, relatively predictable cash flows and may provide an illiquidity premium — an additional return for locking in capital over many years. However, these assets also carry specific risks, such as regulatory, political, construction or technology risks.

In our team, we analysed how new investments fit into the existing portfolio in terms of sector, geography, and risk profile. For instance, adding a fibre network investment to a portfolio heavily exposed to renewable energy can enhance diversification, as the cash flows depend on different drivers. I learnt how the correlation between assets and the effects of diversification are considered when building an infrastructure portfolio that balances risk and return.

ESG integration and EU Taxonomy alignment.

ESG integration means that environmental, social and governance factors are systematically included in the investment process alongside traditional financial metrics. In Europe, the EU Taxonomy provides a classification system that defines which economic activities can be considered environmentally sustainable. For infrastructure investors, this involves assessing whether a renewable energy project, for example, contributes to climate change mitigation and meets specific technical screening criteria.

Why should I be interested in this post?

If you are a business or finance student interested in investment careers, infrastructure investment provides a thrilling blend of finance, strategy, and sustainability. You will work with tangible assets that have a real impact on the economy, such as renewable energy projects that support the energy transition and digital infrastructure that enables data and connectivity.

Useful resources

Munich Re – Official website

MEAG – Asset management of Munich Re and ERGO

EU Taxonomy for sustainable activities

GRESB – ESG benchmarks for real assets

About the author

The article was written in November 2025 by Nicolas SCHULZ-SEMBTEN (ESSEC Business School, Global Bachelor in Business Administration (GBBA), Exchange semester 2025).

“Most people overestimate what they can do in a year and underestimate what they can do in ten.” – Bill Gates

November 20, 2025 by Hadrien PUCHE

In a world that often focuses on immediate results and instant gratification, it can be easy to overlook how regular effort accumulates into long-term impact.

This quote by Bill Gates reminds us that human ambition and effort are most effectively realized over extended periods of time. Planning ahead, embracing patience, and committing to consistent action are the keys to achieving extraordinary outcomes.

In this article, Hadrien Puche (ESSEC, Grande École, Master in Management, 2023 to 2027) reflects on this quote, exploring how it applies not only to personal growth but also to finance, and especially investing.

About Bill Gates

Bill Gates

Source: Wikimedia Commons

Bill Gates is a co-founder of Microsoft and one of the most influential entrepreneurs of the late twentieth and early twenty-first century. Beyond his contributions to technology, he is widely recognized for his philanthropy through the Bill and Melinda Gates Foundation, which focuses on global health, education, and poverty reduction. Gates has often spoken about vision, long-term planning, and the accumulation of effort over time.

The quote, “Most people overestimate what they can do in a year and underestimate what they can do in ten,” is widely attributed to Bill Gates, although its true authorship is uncertain. What matters, however, is that Gates has consistently demonstrated through his work in technology and philanthropy how sustained effort and strategic planning can produce results that far exceed initial expectations.

Analysis of the quote

The central insight of this quote is that time magnifies effort. People often approach challenges with a short-term mindset, setting goals that are ambitious for a short period but fail to consider the compounding effect of consistent action. This makes them unable to reach these goals, leading to potential failure, whereas small steps over ten years can accumulate to produce extraordinary results.

This bias toward short-term thinking is prevalent in many areas of life, from career planning to investing. Individuals overestimate what they can accomplish quickly, which can lead to frustration when immediate goals are not met. Simultaneously, they underestimate what can be achieved over a decade, missing opportunities for growth, learning, and accumulation of value.

In finance, this mindset manifests in impatience with investments or ventures that require time to mature. In personal development, it is reflected in the failure to adopt habits that pay dividends over the long term. Gates’ quote is a reminder that extraordinary achievements are rarely the product of sudden effort. They are the result of consistent, incremental progress compounded over years.

This idea of long-term, incremental effort resonates closely with Malcolm Gladwell’s The Tipping Point: How Little Things Can Make a Big Difference. Gladwell explains how small, consistent actions or seemingly minor events can accumulate over time until they trigger a dramatic, outsized effect: the “tipping point.”

Economic and financial concepts related to the quote

I present below three financial concepts: compound interest, investment horizons, strategic planning and time diversification.

Compound interest

The concept of compound interest is perhaps the most direct financial parallel to Gates’ insight. In investing, the growth of wealth is not linear: returns earned on investments generate additional returns over time, producing an exponential effect. Individuals who understand and leverage compound interest can turn modest contributions into significant wealth over decades, whereas those who focus on immediate gains often miss the cumulative benefits. Gates’ quote captures this principle in human effort and strategic planning, emphasizing that patience and consistency are more powerful than short bursts of activity.

This is why Einstein famously called compound interest the “eighth wonder of the world.”

A graph showing the difference between simple and compounded interest

This graph shows how investing €1,000 over 30 years leads to exponential growth through compounding.

To better understand compounding, download this excel file and try to play around with the interest rate.

Investment horizons

Successful investing often relies on a long-term perspective. Markets can be volatile in the short term, but sustained investment in fundamentally sound assets typically produces growth over extended periods. Investors who overreact to short-term fluctuations may underperform by frequently buying and selling, while those who commit to a long-term strategy benefit from the power of time. Gates’ insight mirrors this approach.

From a financial standpoint, this is also a question of μ vs σ: in the short run, market movements are dominated by σ (sigma; volatility), which makes returns unpredictable and often discouraging. But over longer horizons, μ (mu; the average expected return) becomes more visible, and the noise of volatility fades relative to the trend. In other words, the longer you stay invested, the more likely the underlying growth of the market (and not short-term fluctuations) will determine your outcome.

A graph of the S&P 500 index since 1900

As you can see on this graph, the S&P 500 index tends to perform well on the long run and always recover from times of crisis.

Just as how small investments compound over many years, consistent effort in personal or professional life produces results far greater than what is visible in a single year.

Strategic planning and time diversification

In economics and business, strategic planning means looking beyond immediate gains and considering how decisions will play out over multiple years or even decades. Investments in areas such as research and development, employee training, or infrastructure rarely pay off right away. Yet, as these efforts accumulate, they can create lasting competitive advantages, foster innovation, and drive long-term profitability.

A similar logic applies in finance through time diversification. Short-term market fluctuations can be unpredictable, but the longer an investor stays committed to a well-constructed portfolio, the greater the chance that temporary volatility smooths out and long-term growth prevails.

Gates’ quote captures the essence of both ideas: meaningful results (in business, investing, or personal development) come not from quick wins but from sustained effort and the willingness to think further ahead than the next quarter or the next year.

My opinion about this quote

This quote feels especially relevant today, as the pace of technological change accelerates with the rise of artificial intelligence and other innovations. Society is not accustomed to this level of speed, which can distort our perception of what is achievable. While there is a temptation to believe that technological advances will produce massive change within just a few years, Gates’ quote reminds us to temper optimism with realistic expectations. In reality, it often takes considerable time for firms to integrate new technologies and realize meaningful productivity gains, as seen with the adoption of the internet and, more recently, with AI.

This dynamic is clearly illustrated in the graph below, known as the Gartner Hype Cycle. This framework describes the typical pattern of expectations surrounding new technologies. When a breakthrough such as generative AI emerges, public enthusiasm and media attention often inflate expectations far beyond what is achievable in the short term. As a result, we tend to overestimate the immediate impact of the innovation.

However, as the technology progresses through the different phases of the cycle (from initial excitement to disillusionment, and eventually to maturity), its long-term transformative potential becomes clearer. The Gartner Hype Cycle helps explain why we so often underestimate what a technology can achieve over a decade, even while exaggerating what it can achieve in its first year.

A graph of the Gartner Curve

The Gartner Hype Cycle, illustrating the typical progression of expectations around new technologies (Source: Gartner).

At the same time, the quote encourages reflection on long-term potential. Even if technologies develop more slowly than expected, incremental improvements over a decade can still lead to transformative outcomes. The lesson is to maintain both patience and vigilance, avoiding the extremes of overconfidence or neglect.

This principle also applies to personal finance and life planning. Many people set short-term goals and become frustrated when progress seems slow. Yet, the cumulative effect of consistent action, thoughtful saving, learning, or skill development often surpasses what we anticipate in the first year. By recognizing the value of long-term effort, individuals can better allocate resources, set meaningful goals, and make decisions that pay off over time.

In professional contexts, such as career progression or entrepreneurship, the quote is equally valuable. Building a company, developing expertise, or pursuing innovation rarely produces instant results. Sustained effort, compounded knowledge, and consistent decision-making are what lead to exceptional achievements over the long term.

Why should you be interested in this post?

Bill Gates’ quote is a reminder to plan thoughtfully, embrace patience, and recognize the exponential power of effort. While no one can predict the future with certainty, adopting a long-term perspective allows individuals to maximize the impact of their actions and investments.

This insight is particularly relevant for students and young professionals. You do not need a detailed plan for the next ten years, but considering the direction of your efforts and making incremental progress can dramatically improve outcomes over time. Recognizing the gap between short-term overestimation and long-term underestimation fosters discipline, focus, and resilience in both personal and financial decisions.

Whether applied to investing, professional development, or personal goals, this quote encourages a mindset that values consistency, foresight, and the compounding power of effort. Understanding this principle allows individuals to avoid the pitfalls of impatience while harnessing the opportunities presented by sustained dedication.

▶ All posts about Quotes

Useful resources

– The Tipping Point: How Little Things Can Make a Big Difference by Malcolm Gladwell

About the Author

This article was written in 2025 by Hadrien Puche (ESSEC, Grande École, Master in Management 2023 to 2027)

My internship at Valori Asset Management

November 21, 2025November 17, 2025 by Roberto RESTELLI

In this article, Roberto RESTELLI (ESSEC Business School, Master in Finance (MiF), 2025–2026) shares key takeaways from a four‑month off‑cycle internship as an Investment Analyst Intern at Valori Asset Management, focusing on subordinated debt within the Fixed Income team.

Introduction

Before starting my Master in Finance at ESSEC Business School, I completed a four‑month off‑cycle internship at a €2.5bn asset management firm. The role developed my skills in credit risk assessment and gave me hands‑on exposure to macroeconomic analysis, performance‑measurement methodologies, the Bloomberg Terminal, and problem‑solving under time pressure. Within the Fixed Income team, I supported a subordinated debt fund through top‑down macro work and bottom‑up credit analysis on AT1 (CoCo), Tier 2, and RT1 bonds: subordinated bank and insurance capital instruments designed to absorb losses and meet regulatory capital requirements, sitting below senior debt in the capital structure and therefore offering higher yields in exchange for higher risk. AT1 (CoCo) and RT1 can be perpetual with discretionary coupons and loss-absorption features (write-down or equity conversion), while Tier 2 is typically dated, less deeply subordinated and only absorbs losses in gone-concern situations (resolution or insolvency). This post summarizes what I did at Valori Asset Management and what I learned—professionally and personally.

This was my first deep dive into fixed income after prior experience in private banking and equities. I learned that fixed income is not only about valuations and ratings; it also requires a macro view, policy awareness, trading considerations, and clear, critical thinking on portfolio positions.

About Valori Asset Management

Valori AM is an investment boutique founded 11 years ago, initially in Luxembourg and later expanding to Milan (Italy) and Chiasso, near Lugano (Switzerland). The SICAV (investment company with variable capital) are managed out of Luxembourg; advisory and family‑office services are in Milan; and the investment team in Chiasso manages nine funds. As of July 2025, assets under management and advisory (AUMA) were €2.5bn, with a target of €3bn by January 2026.

Logo of Valori AM.

Source: the company.

What I did during my internship

My work focused on three areas: ESG (Environmental, Social, and Governance) macro research and reporting; sovereign credit‑risk analysis across EMEA (Europe, the Middle East, and Africa), LATAM (Latin America), and the US; and two macro‑quantitative models.

ESG macro research and reporting

I conducted 30+ ESG country studies across EMEA and LATAM, using the Bloomberg Terminal to gather data and charts, and building Excel models to compare composite ESG scores and rankings. I complemented this with Morningstar Sustainalytics to benchmark carbon footprints and relative positioning. Bloomberg and Morningstar are two essential tools for working in asset management and hedge funds. Through the Bloomberg terminal, you can track real-time news on equities, fixed income, interest rates and all major financial markets, as well as access key economic and macro data for fixed income analysis, financial statements for equity positions, and even route securities orders via brokers. Morningstar is likewise crucial, not only for financial and economic news but also for ESG metrics and fund analytics. I produced concise reports highlighting the strongest ESG profiles—both in absolute terms and relative to the fund’s existing bond exposures. These outputs fed directly into portfolio discussions, ensuring ESG considerations were integrated alongside risk and return.

Sovereign credit‑risk valuation (EMEA, LATAM, US)

I performed 20+ sovereign credit assessments using indicators such as GDP growth, PMI, retail sales, current‑account balance (% of GDP), and unemployment. Sourcing data from Bloomberg and IMF (International Monetary Fund) forecasts, I translated the metrics into comparable Excel scorecards to surface relative value across regions. I then presented actionable ideas—such as Romanian government bonds, U.S. Treasuries, and Spanish bonds—to initiate new positions or reaffirm existing ones, linking macro fundamentals to valuation, liquidity, and timing.

Two macro‑quantitative models

BTP–Bund spread positioning model: an Excel‑based quant‑positioning model using ETF (exchange traded funds) flow data, Z‑scores (statistical measure that indicates how many standard deviations a value is away from the mean of a data set, allowing comparisons across different scales), regression analysis, CDS (credit default swaps), and macro‑financial indicators to generate daily signals and stay updated on the BTP (italian government bond)–Bund spread.
EU (europe) macroeconomic VAR (Vector Autoregression) model: a model for EU countries using key economic indicators and yield curves (GDP, PMI, retail sales, and 2‑ to 30‑year yields). I applied VAR analysis in EViews to forecast future movements of indicators and prices, with outputs aggregated in Excel; This macroeconomic VAR model is used to analyze how shocks to one variable (for example GDP or long-term yields) propagate over time to the other macro and yield-curve variables, and to generate consistent scenario analyses for EU economies. Using EViews, I estimated the VAR and produced multi-period forecasts for all the variables jointly, building different future scenarios and updating these forecasts as new data became available. EViews is a widely used econometrics and time-series analysis software, designed for estimating models, running statistical tests, and generating forecasts in a user-friendly interface.

Required skills and knowledge

The internship demanded both technical and soft skills. Technically, I worked extensively in Excel (modeling and forecasting), Bloomberg (market data and news), EViews (econometrics), and PowerPoint (investment pitches). On the soft‑skills side, I learned to prioritize under tight deadlines, double‑check deliverables, and solve problems independently to deliver high‑quality work.

What I learned

This internship provided practical experience in investment management within a professional, multicultural environment. I learned the importance of active listening: carefully understanding the initial brief and following colleagues’ discussions improves the quality and speed of the work. In a fast‑paced desk environment, acting like a sponge accelerates learning and connects day‑to‑day tasks with the bigger investment picture.

I deepened my fixed‑income knowledge beyond coursework: how rates, the broader debt market, and derivative hedges interact; how to think and debate credit; and how to combine top‑down macro views with bottom‑up analysis to form clear, defensible portfolio decisions. I also gained practical command of execution tools—building and stress‑testing Excel models, using Bloomberg for data and news, preparing pitches in PowerPoint, and applying econometrics in EViews. Altogether, the experience strengthened my analytical discipline and confirmed my long‑term interest in financial markets.

Financial concepts related to my internship

The role of AT1

AT1s typically offer equity‑like yields with bond‑like structures; frequent call features can create pull‑to‑par upside when issuers refinance at the first call. Post‑crisis capital buffers and resilient profitability support coupon sustainability and a steady call culture, improving carry reliability. Dislocations and regulatory risk premia often leave AT1 spreads wide vs. senior/RT1—creating room for outperformance if sentiment, capital ratios, or rates volatility improve.

The importance of balancing an ESG portfolio

Building a well‑diversified portfolio with a robust ESG process can improve long‑term resilience and broaden the investor base, especially among institutional allocators with sustainability mandates.

The key role of financial news

Investors need both analytical depth and speed in reacting to market‑moving news and policy announcements. Consistently reading high‑quality reports and newsflow helps anticipate paths for markets and frame timely responses.

Why should I be interested in this post?

If you are a student interested in business and finance—especially fixed income—this post offers practical, desk‑level insights: how the work is structured, the skills required, and how to grow in a markets‑focused role, based on months on the desk alongside a 15+ person team.

Conclusion

My internship at Valori AM sharpened my analytical abilities and helped me grow personally. Learning from colleagues taught me how to contribute from day one and confirmed my interest in investment management and fixed income. Looking ahead, I aim to pursue a buy‑side role at a fund or bank, focusing on portfolio strategy in financial markets.

Useful resources

Bloomberg

International Monetary Fund (IMF)

Morningstar Sustainalytics

Valori Asset Management

About the author

The article was written in November 2025 by Roberto RESTELLI (ESSEC Business School, Master in Finance (MiF), 2025–2026).

My internship experience at Bpifrance – Finance Export Analyst

November 17, 2025November 16, 2025 by Julien MAUROY

In this article, Julien MAUROY (ESSEC Business School, Global Bachelor in Business Administration (GBBA), 2021-2025) shares his professional experience as a Finance Export Analyst at Bpifrance.

Overview of Bpifrance and Bpifrance Assurance Export

Bpifrance is France’s public investment bank. Created in 2012 to support businesses at every stage of their development, from start-up to international expansion, through financing, investment, innovation and guarantees.

Here is a chart showing the organization of Bpifrance and its entities in 2023.

Bpifrance organizational chart as of December 31st 2023.

Source: the company.

Today, Bpifrance plays a major role in the French economy. In 2023, the institution supported more than 84,000 companies, mobilizing over €69 billion in financing, guarantees, investment and export support.

Bpifrance currently employs approximately 3 700 people across France, making it one of the largest public financial institutions in Europe.

Since 2017, Bpifrance Assurance Export has been managing public export guarantees on behalf of and under the control of the State (more specifically, the Treasury Department). These guarantees secure and facilitate the international operations of French companies by covering the economic and political risks associated with their export contracts.

Before 2017, the management of public export guarantees was carried out by Coface. The transfer of this activity to Bpifrance aimed at strengthening the alignment between France’s industrial policy, export strategy, and financing tools.

My experience and service

I joined this department as an Export Finance Analyst intern, working at the intersection of three departments: ASR (Administration and Risk Monitoring), ESC (Social Environment and Governance) and NTI (Internal Rating and Pricing). I had the opportunity to work with teams responsible for portfolio monitoring (€69 billion in outstanding loans and nearly 1,500 companies) and teams responsible for analysing and reviewing export insurance applications. This internship had a strong economic, strategic and geopolitical aspect, and working in collaboration with the treasury was very enriching.

Here is a chart showing the distribution of services and the managerial structure of Bpifrance.

Organization of Bpifrance.
Bpifrance network organization
Source: the company.

During this internship, my tasks were varied and demanding:

Participating in the analysis of the financial and non-financial situation of exporting companies and their foreign counterparts,
Carrying out an assignment on the credit insurance portfolio in order to better manage reporting on behalf of the Treasury Department,
Producing benchmarks and memos for the Treasury, participating in various committees (rating, pricing, guarantees commission).

These tasks enabled me to understand the importance of export financing and guarantees in the French economy and in supporting exporters who wish to carry out projects abroad.

Macroeconomic vision, economic diplomacy and geopolitics

Working in this context allowed me to broaden my macroeconomic vision and better understand the interactions between finance, politics and geopolitics. Analysing transactions that sometimes involved governments directly and institutional players made me aware of the challenges of sovereign risk management. I was able to observe how financial decisions are part of a foreign economic policy approach: supporting a strategic project in an emerging country or strengthening a French industrial sector.

I understood that risk analysis is not limited to reading a company’s financial statements, but requires a detailed understanding of the economic, social and political environment of the buyer or the purchasing country.

What I learnt from this experience

This internship was a rich and decisive experience in my career. It taught me to think on a macroeconomic scale and analyze risks from a strategic perspective.

I worked on sometimes complex economic issues between exporting companies and foreign buyers. I developed rigorous analytical skills and a more comprehensive understanding of the challenges of export financing and insurance in the French economy.

Finally, this immersion at the crossroads of finance, strategy and macroeconomics was fascinating. I gained a lot from it and am certain that I want to continue my career in multidimensional roles like this one.

Useful resources

Business

bpifrance

OECD

Direction générale du Trésor

Academic articles

Hayez S. and F. Savel (2018) Bpifrance : entreprises et territoires, Revue d’économie financière, 132(4):179-189.

Gervais F., Guillermain E., Parker D., Venin E., Wagenhausen F., Mayrhofer U., Soathan G.A., Aymard T., Meurier M. B., Varet S., Arzumanyan L. and Ph. Blesbois (2020) Module 22. La gestion du risque de crédit, Exporter – Pratique du commerce international Foucher (27th edition), 22: 332-347.

Alferdo P. (2019) Fiche 15. L’assurance-crédit export, Fiches de droit du commerce international, 215-223.

About the author

The article was written in November 2025 by Julien MAUROY (ESSEC Business School, Global Bachelor in Business Administration (GBBA), 2021-2025).

The market is never wrong, only opinions are

November 14, 2025November 11, 2025 by Hadrien PUCHE

In this article, Hadrien PUCHE (ESSEC Business School, Grande École Program, Master in Management, 2023-2027) comments on Jesse Livermore’s timeless quote and explores its relevance for modern investors and students seeking to understand market psychology.

About Jesse Livermore

Jesse Livermore (1877–1940) was one of Wall Street’s first great speculators, a man who understood the rhythm of markets long before data screens and algorithms existed. He made and lost several fortunes, most famously by shorting stocks ahead of the Panic of 1907 and the Great Depression of 1929.

Livermore’s life was both brilliant and tragic, but his insights into crowd behavior and emotional discipline remain essential reading for anyone who wishes to understand how markets truly work.

Jesse Livermore

Analysis of the quote

“The market is never wrong, only opinions are.” – Jesse Livermore

When Livermore says, “The market is never wrong, only opinions are,” he reminds us that prices are not moral judgments or forecasts of truth — they are the product of human behavior under uncertainty.

Markets do not care about fairness or logic. They reflect the collective sum of all opinions, weighted by money. To claim that “the market is wrong” is to claim that your personal view outweighs the collective intelligence and capital of millions of other participants.

That rarely ends well. The market may sometimes overreact, but it is almost always the individual who misunderstands its message.

This quote, in the end, is a lesson in humility. Investors lose not because they lack intelligence, but because they refuse to admit when the market has proven them wrong.

Economic and financial concepts related to the quote

1 – Market efficiency

Livermore’s idea anticipates the theory of market efficiency introduced many decades later by Eugene Fama in 1970. This theory suggests that prices incorporate all available information, which means it is almost impossible to consistently beat the market.

Even if markets are not perfectly efficient, they are highly competitive ecosystems. Information spreads very quickly, and any mispricing is soon corrected by professionals equipped with technology and capital.

So when you decide that the market is wrong, you are effectively betting that your insight is sharper than everyone else’s, from hedge funds to central banks. Occasionally, some investors do have that edge, but they are the exception, not the rule.

2 – The Wisdom and the Madness of Crowds

In The Wisdom of Crowds (2004), James Surowiecki argues that large groups can make remarkably accurate collective judgments, even when individual members are biased or imperfectly informed. Financial markets often exemplify this phenomenon: while single investors are prone to emotion and error, the aggregation of their independent views can produce a consensus that efficiently reflects available information.

Yet, Surowiecki also cautions that collective intelligence breaks down when independence disappears. In markets, this occurs when participants are driven by shared emotions: panic during crashes or euphoria during bubbles. At such moments, the “wisdom” of the crowd can turn to madness.

3 – Risk management and flexibility

Livermore’s warning remains as relevant as ever: never fight the market. Every investor is wrong sometimes, but what matters is how quickly you realize it and act. The real danger isn’t being wrong, it’s refusing to admit it. Livermore’s rule captures this perfectly: “Cut your losses short and let your winners run.”

Good risk management starts there. It means knowing how much you can afford to lose, setting a stop-loss before entering a trade, and sticking to it. A stop-loss isn’t a sign of weakness, it’s a protection. It prevents small mistakes from turning into big ones and keeps you in the game for the long run.

As Keynes famously said, “Markets can stay irrational longer than you can stay solvent.” Managing risk isn’t about predicting the market, it’s about surviving it.

My opinion about this quote

Livermore’s insight feels even more relevant in today’s world of instant information and algorithmic trading. Social media multiplies opinions at unprecedented speed, creating noise that can easily obscure reality.

Recent market episodes illustrate this perfectly. In 2021, for example, the GameStop saga showed how collective emotion on Reddit briefly overwhelmed fundamental analysis, sending the stock to irrational highs before gravity reasserted itself.

Similarly, during the cryptocurrency boom of 2021 and 2022, investors often claimed that “this time is different,” only to face sharp corrections when enthusiasm faded.

Closer to home, the Atos case in 2024 reflected the same dynamic. Despite the company’s severe financial distress and an announced dilution that effectively made the stock almost worthless, waves of speculative buying pushed its valuation to absurd levels for a few days. When reality returned, the correction was brutal.

Atos stock price chart

These examples confirm Livermore’s message: opinions can be wrong for a long time, but the market always has the final word.

Why should you be interested in this post?

For students and young professionals, Livermore’s lesson is a call for intellectual humility. Markets are complex and adaptive systems, impossible to predict with precision but possible to understand with patience.

Learning to separate your opinions from what the market is telling you will make you a better analyst, investor, and decision-maker. It will also help you develop emotional intelligence, a skill far rarer than technical knowledge.

In finance, as in life, the goal is not to be right, it is to adapt faster when you are wrong.

Useful resources

Reminiscences of a Stock Operator – Edwin Lefèvre (1923)

The Efficient Market Hypothesis and Its Critics – Burton Malkiel (2003)

Thinking, Fast and Slow – Daniel Kahneman (2011)

SimTrade course Market information

Academic research

Fama E. (1970) Efficient Capital Markets: A Review of Theory and Empirical Work, Journal of Finance, 25, 383–417.

Fama E. (1991) Efficient Capital Markets: II, Journal of Finance, 46, 1575–617.

Grossman S.J. and J.E. Stiglitz (1980) On the Impossibility of Informationally Efficient Markets, The American Economic Review, 70, 393–408.

Chicago Booth Review (30/06/2016) Are markets efficient? Debate between Eugene Fama and Richard Thaler (YouTube video)

About the author

This article was written in November 2025 by Hadrien PUCHE (ESSEC, Grande École Program, Master in Management – 2023–2027).

Don’t look for the needle in the haystack. Just buy the haystack.

November 13, 2025November 6, 2025 by Hadrien PUCHE

Over the past decade, investing has become more accessible than ever. Anyone with a smartphone can now buy or sell shares, cryptocurrencies, or ETFs within seconds. While this democratization of finance has clear benefits, it has also led many to lose money by chasing “the next big stock.” Retail investors often believe they can find the next Tesla or Nvidia: the famous “needle in the haystack.” Yet, as history repeatedly shows, only a small fraction succeed.

That is precisely what John C. Bogle, the founder of Vanguard and the father of index investing, warned against. His advice was simple yet profound: stop trying to find the needle, just buy the entire haystack.

In this article, Hadrien PUCHE (ESSEC Business School, Grande École Program, Master in Management, 2023-2027) comments on Bogle’s timeless quote, exploring how it captures one of the most important principles in modern investing: diversification.

About John C. Bogle

John Clifton Bogle (1929 – 2019) was an American investor and philanthropist best known as the founder of The Vanguard Group, one of the world’s largest asset management firms. In 1976, Bogle created the first index fund available to individual investors, the Vanguard 500 Index Fund, designed to replicate the performance of the S&P 500 index rather than beat it.

At the time, his idea was revolutionary. The prevailing belief was that skilled managers could consistently outperform the market through superior stock selection and market timing. Bogle argued the opposite: after accounting for management fees, transaction costs, and human error, most active managers fail to beat the market over the long term. His philosophy emphasized simplicity, discipline, and cost-efficiency, principles that now underpin the $12 trillion global index fund industry.

John C. Bogle
John Bogle

Analysis of the quote

Bogle’s quote encapsulates a powerful truth: successful investing does not require finding hidden gems, but rather owning the market as a whole. The “needle in the haystack” represents the elusive high-performing stock every investor dreams of. Yet statistically, most attempts to find it fail. By buying the entire “haystack” (that is, the full market) investors automatically own all the winners and minimize the risk of missing them.

Empirical research overwhelmingly supports this idea. Over time, a small number of stocks account for the majority of total market gains. A study by Hendrik Bessembinder (2018) found that, since 1926, just 4% of U.S. stocks generated the entire net wealth created by the stock market. Most others either underperformed or disappeared entirely. Thus, identifying the few long-term winners ex ante is nearly impossible. The rational solution is to own the entire market, a strategy that index funds make accessible and affordable.

Bogle’s insight also reflects humility: acknowledging that even professionals struggle to outperform broad market indexes. By accepting this, investors shift their focus from beating the market to participating in its long-term growth.

Financial concepts related to the quote

I present below three fiancial concepts: diversification, index funds, and the efficient portfolio frontier.

Diversification

Diversification is the cornerstone of modern portfolio theory. It refers to spreading investments across different assets or sectors to reduce risk. By owning a broad range of companies, an investor limits the impact of any single firm’s poor performance.

Bogle’s philosophy embodies this principle. Buying the entire market, through an index fund tracking, for example, the S&P 500 or the CAC 40, ensures exposure to hundreds of firms across multiple sectors. The failure of one or two is offset by the success of others.

In practice, diversification improves a portfolio’s risk-adjusted return. It does not eliminate risk entirely but reduces idiosyncratic risk (the risk specific to individual companies). What remains is systematic risk, which affects the entire market and cannot be diversified away. This relationship is evident when observing how portfolio risk declines as the number of securities increases.

Risk of a portfolio as a function of the number of assets

Index funds

Index funds are collective investment vehicles that aim to replicate the performance of a specific market index, such as the S&P 500 (U.S.), the MSCI World (Global), or the CAC 40 (France). They hold the same securities as the index, in the same proportions, ensuring the fund’s return closely matches that of the benchmark. Because they are passively managed, index funds have very low management fees (often 10 to 20 times cheaper than traditional mutual funds). They also provide instant diversification: by buying one share of an S&P 500 ETF, you effectively invest in 500 companies.

This simplicity explains their rapid growth. According to Morningstar, index funds and ETFs now represent more than 50% of all U.S. equity fund assets. Their accessibility and transparency have fundamentally reshaped global investing.

However, one subtle limitation is that most major indexes are market-cap weighted, meaning the largest companies exert the greatest influence. As of 2025, the “Magnificent 7” (Tesla, Nvidia, Apple, Microsoft, Alphabet, Meta, and Amazon) represent nearly 35% of the index’s total value. The chart below illustrates their growing share of total market capitalization over time, highlighting how even “diversified” investors are increasingly concentrated in a handful of mega-cap technology firms.

Market capitalization of the Magnificent 7 as a share of index total

The efficient portfolio frontier

Introduced by Harry Markowitz in 1952, the efficient frontier illustrates the optimal trade-off between risk and (expected) return for a diversified portfolio. Each point on the curve represents the best possible expected return for a given level of risk.

Efficient frontier graph

Index investing often lies near this efficient frontier. Because broad indexes like the S&P 500 already aggregate thousands of investors’ information and preferences, they effectively represent a “market portfolio” close to the optimal mix. Passive investors benefit from this efficiency without needing to forecast which assets will outperform.

Understanding the efficient frontier also reveals why chasing high returns through concentrated bets is dangerous. While such strategies may yield spectacular results occasionally, they almost always involve disproportionate risk.

My opinion about this quote

I believe this quote perfectly captures the essence of modern investing: simplicity often outperforms sophistication. Many individuals (and professionals) spend enormous time and money trying to beat the market, often with limited success. The SPIVA (S&P Indices Versus Active) report consistently shows that the majority of actively managed funds underperform their benchmark indexes over the long term. As of 2024, for instance, more than 85% of U.S. equity funds lagged the S&P 500 over a 10-year period.

The chart below illustrates this trend across different investment horizons, showing that the longer the time frame, the harder it becomes for active managers to outperform their benchmarks.

Most US equities fund managers fail at outperforming the S&P500 index

The reasons are clear: high management fees, excessive trading, and the psychological pressure to deliver short-term results. Fund managers often prioritize annual bonuses over long-term compounding, leading to decisions driven by incentives rather than rational analysis.

At the same time, Bogle’s approach is not entirely without nuance. Index funds may appear perfectly diversified, but as noted earlier, their concentration risk has increased with the rise of mega-cap tech firms. Buying “the market” today means owning a portfolio dominated by a handful of giants. That, too, is an investment choice, one that has worked well recently but may not always hold true.

Therefore, the essence of Bogle’s wisdom is not that index investing is flawless, but that it is rational. It reflects humility, an understanding that long-term success comes not from prediction, but from participation, discipline, and patience.

Why should you be interested in this post?

For students and young professionals, this quote offers two critical lessons.

First, from a personal investing perspective, it highlights the power of simplicity. Investing through low-cost index funds allows anyone, regardless of expertise, to participate in long-term market growth without the stress of constant stock-picking. It is a proven strategy for building wealth steadily over time.

Second, from a professional standpoint, understanding how and why index funds dominate modern markets is essential. Whether you aim to work in asset management, corporate finance, or risk consulting, you must grasp how passive investing shapes market dynamics, liquidity, and valuation.

Ultimately, Bogle’s message goes beyond finance. It teaches intellectual humility: the recognition that long-term discipline often triumphs over short-term brilliance.

Useful resources

Vanguard official website

Bessembinder, H. (2018). Do Stocks Outperform Treasury Bills? Journal of Financial Economics.

SPIVA U.S. Scorecard (2024)

Markowitz, H. (1952). Portfolio Selection. Journal of Finance.

Bogle, J. C. (2017). The Little Book of Common Sense Investing.

About the Author

The article was written in November 2025 by Hadrien PUCHE (ESSEC Business School, Grande École Program, Master in Management, 2023-2027).

Book by Slah Boughattas: State of the Art in Structured Products

November 4, 2025 by Slah BOUGHATTAS

In this post, Slah BOUGHATTAS (Ph.D., Associate of the Chartered Institute for Securities & Investment (CISI), London) provides an extract from the book ‘State of the Art in Structured Products: Fundamentals, Designing, Pricing, and Hedging’ (2022).

This post presents pedagogical philosophy, structure, and target audience, including graduate students in finance, university professors, and practitioners in derivatives and structured products.

State of the Art in Structured Products: Fundamentals, Designing, Pricing, and Hedging

Source: the company.

Summary of the book

The book aims to provide both the theoretical background and the practical applications of structured products in modern financial markets. It systematically explores the fundamentals of derivatives, equity and interest rate markets, stochastic calculus, Monte Carlo simulations, Constant Proportion Portfolio Insurance (CPPI), risk management, and the financial engineering processes involved in designing, pricing, and hedging structured products.

Financial concepts related to the book

Structured Products, Derivatives, Options, Swaps, Structured Notes, Bonus certificates, Constant Proportion Portfolio Insurance (CPPI), Monte Carlo Simulation, Fixed Income, Floating Rate-Note (FRN), Reverse FRN, CMS-Linked Notes, Callable Bond, Financial Engineering, Risk Management, Pricing, and Hedging.

Context and Motivation

The financial engineering of structured products remains one of the most sophisticated domains of quantitative finance. While the literature on derivatives pricing is vast, comprehensive references specifically dedicated to the end-to-end process of structured product creation — designing, pricing, and hedging — remain scarce.

State of the Art in Structured Products bridges this gap. The work is structured to serve both as a teaching manual and a professional reference, progressively building from fundamental principles to advanced practical implementations.

Structure of the Book

Derivatives Fundamentals and Market Instruments – recalls the essential mechanics of equity and interest-rate derivatives
Designing Structured Products – shows how term sheets and payoff structures emerge logically from financial objectives
Pricing and Risk Analysis – provides analytical and simulation-based approaches, including Monte Carlo method
Hedging and Risk Management – explores dynamic replication, sensitivities, and practical hedging of structured notes.
Advanced Topics – covers Constant Proportion Portfolio Insurance (CPPI), callable and floating-rate instruments, and swaptions

Why should I be interested in this post?

The book’s main contribution lies in its integrated approach combining conceptual clarity, quantitative rigor, and practical implementation examples. It is intended for professors and instructors of Master’s programs in Finance, graduate students specializing in derivatives or structured products, and professionals such as financial engineers, product controllers, traders, dealing room staff and salespeople, risk managers, quantitative analysts, middle office managers, fund managers, investors, senior managers, research and system developers.

The book is currently referenced in several academic libraries, including ESSEC Business School Paris, Princeton University, London School of Economics, HEC Montreal, Erasmus University Rotterdam, ETH Zurich, IE University, Erasmus University Rotterdam, and NTU Singapore.

Useful resources

Slah Boughattas (2022) State of the Art in Structured Products: Fundamentals, Designing, Pricing, and Hedging Advanced Education in Financial Engineering Editions.

About the author

The article was written in November 2025 by Slah BOUGHATTAS (Ph.D., Associate of the Chartered Institute for Securities & Investment (CISI), London).

Risk as a strategic lever

Reducing and structuring risk with consulting

Measuring and pricing risk with export insurance and financing

Understanding risk in order to leverage it

Conclusion: the strategic value of risk management

Opening the topic with the vision of Frank Knight and Nassim Taleb

Related posts on the SimTrade blog

Useful resources

Academic articles and books

About the author

Founding BCapital Fund (2022)

Concept & investment approach

How we structured the fund

Personal reflection

What I learned

Concepts related to my society

Why should I be interested in this post?

Conclusion

Related posts on the SimTrade blog

Useful resources

About the author

Introduction to company valuation

Users and uses of company valuation

Examples of valuation

Core competencies in valuation

General approaches and specific methods

Critical aspects and limits of valuation models

Practical applications of company valuation

Discounted Cash Flow (DCF)

What is a DCF?

Uses of DCF

Building a DCF

Determining the terminal value

Defining the discount rate

Discounting the cash flows

Example

Why should I be interested in this post?

Related posts on the SimTrade blog

Useful resources

About the author

About Robert Arnott

Analysis of the quote

Case study: March 2020 – Investing during the Covid crisis

Financial concepts related to the quote

The risk–return tradeoff

The psychology behind discomfort

Contrarian investing and market cycles

My opinion about this quote

Why should you be interested in this post?

Related posts on the SimTrade blog

Useful Resources

Business Books

Academic Articles

Classic Economic & Finance Works

About the Author

What “Aerospace & Defence” is (and how public companies are usually organized)

The multiples: why EV/EBIT is the workhorse in A&D

Backlog: quantity is the headline; quality drives value

Contract risk: the paper your revenue sits on

Execution and supply chain: where backlog becomes (or does not become) cash

Typical business mix—why it matters for valuation

A compact playbook you can actually use

Why should I be interested in this post?

Related posts on the SimTrade blog

Useful resources

About the author

About the company

My internship

My missions

Required skills and knowledge

What I learned

Financial concepts related to my internship

Credit risk assessment

Local government implicit debt

Refinancing and liquidity pressure

Why should I be interested in this post?

Related posts on the SimTrade blog

Professional experiences

Financial techniques

Useful resources