Professor Marc Lipson: Telling the Stories Behind Human Decisions

Professor Marc Lipson was scanning the course catalog as a University of Virginia undergraduate when two subjects leapt out at him: anthropology and archeology.

“Anthropology is about what makes us human, and archeology is about understanding humans through what they build. These things were always on my mind,” said Lipson, the Darden finance professor who earned a bachelor’s in anthropology. “This is at the heart of what interests me — people and what they do.”

Lipson is an expert in equity market trading and institutional investing and is the Robert F. Vandell Professor of Business Administration. With a math professor father (with whom Lipson co-wrote math textbooks) and a mother who owned a business renovating and building houses, Lipson’s interest in finance might be expected. But he says it started with that early fascination with people and how they make things.

“If you really love how things are created and how people make decisions about their world, one path is to understand how this is done through organizations, like businesses,” he said.

That connection started shortly after college. He completed a master’s degree in accounting at UVA, but he wanted to know more — the why and how of business decisions.

“The next step for me, then, was understanding how to analyze the decisions that led to something being done,” said Lipson, who earned a Ph.D. in finance at the University of Michigan.

Dissecting the How and Why Behind Market Moves

Lipson has published widely in market microstructure research — how a market’s design and organization affect price formation and liquidity. He spent a year as a visiting scholar at the New York Stock Exchange, served on the NASDAQ Economic Advisory Board and is a former editor in chief of the journal Financial Management. His most recent research paper, with Professor Davide Tomio and Jiang Zhang, showed that stock prices become more volatile when retail investors start trading options on those stocks.

“When we make it very cheap for retail traders to move from the stock market to the option market, we’ve created far more leveraged pressure on the underlying stock market,” he said.

It’s a prime example of what Lipson finds fascinating about finance: how the characteristics of people influence the decisions they make and the course of world events.

“I’m interested in the latest thing that Lululemon is doing and the latest thing that Elon Musk is doing. These are the businesses and people I’m interested in — their stories, their activities, how they think about the world, what they’re trying to do, the strategies, the new products. This is like a play-by-play of how the world is being created.”

Inspiring New Ideas and Art

Lipson tips his hat to the innovators who introduce new ways of living, thinking and experiencing the world. His own foray into that world as a teacher was a one-week course he created with Professor Raul Chao. It was a fast-paced innovation challenge (inspired by the Adrenaline Film Project that was part of the Virginia Film Festival) in which students worked off a prompt to develop, build, test, receive feedback on and formulate a new-product business plan. He also was on the teaching team for IDEA, an experiential, innovation-focused course that paired companies with teams of First Year students who came up with plans to tackle specific challenges.

Lipson has been recognized nearly every year for outstanding teaching since his earliest days as a teacher. What he loves about teaching is guiding people to and through their first experiences with an idea.

“There’s a magic to the first moment of encountering an idea. You can take something that looks confusing, intimidating, random, and, suddenly, you can make sense of it.”

Not surprisingly for someone who loves the magic of a new idea, Lipson likes to create. He has played bass in area bands for years, most of which featured original music. He recently joined a new band, Midnight Buzz, that plays classic rock at Charlottesville-area venues like Durty Nelly’s and the Glass House Winery.

Skilled primarily at bass, with some ability on guitar, drums and saxophone, he also fills in wherever needed in the Darden faculty-student band Blues Jam. He says the instantaneous creative process of improvisation is a nice balance to the longer-term development of a research paper or institutional goals, which Lipson compares to nurturing a garden, a passion he shares with his wife, Ellen Climo.

Lipson and Climo also collect art with a focus on photography, primarily current artists, Southern artists, and the New York school of the 1940s and ’50s. Many of the artists are people they know and love.

“Art is that very self-conscious action where you try to describe what it means to you to be a human living in the world. In no way is our humanness better expressed than through our art,” he said. “If you’re interested in humans and the world, then I think art becomes almost a necessary passion.”

As a senior faculty member, Lipson is now more involved at the institution level. He enjoys the creative process of bringing great ideas into practical reality for Darden’s future.

“We spend a great deal of time and energy mentoring faculty to do, extraordinarily well, the special thing that we do at Darden,” Lipson said. “I believe we do something unique, and I’m very focused on how Darden can continue to be the best at what we do.