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liff Smith's colleague Jerry Zimmerman recalls the story this way:

A student responding to a series of questions in class began giving the impression that he was making things up. Smith dragged a chair over to the bluffer's desk and climbed on top of it. When the student paused to ask what was going on, Smith drawled, "It's getting so deep in here, I figured I better keep myself from drowning."

Whatever it takes to stimulate learning, Clifford W. Smith Jr. is willing to do it.

"I don't worry about saying something that might make me look silly if it makes it more likely that someone will get the point and retain it," Smith says. His subject matter can be, by his own admission, "deadly dull and boring." So, he says, "I try and figure out ways to communicate the information so people learn something, and they also have a good time along the way."

Louise and Henry Epstein Professor of Business Administration at the Simon School, Smith is as likely to quote Yogi Berra as Adam Smith, to liken derivative securities to Legos, and to ask his audience to deal with such improbabilities as an orchestra concertmaster hammering at a nail with his violin.

"In a humorous way, with a lot of probing, Cliff tries to get everyone to a level of understanding," says Simon executive student Dick Klaasse, a bank employee back home in the Netherlands, who also cites Smith's emphasis on case studies backed up by a wealth of research. "You need to be on your toes to get the message. But if you ask the right questions, Cliff will give you plenty of response."

There's no hiding in Smith's lecture hall. His in-your-face style guarantees it. He zeroes in on students, gestures, points, pounds desks, paces the room, and speaks excitedly in his Georgia drawl.

"If you're not prepared," Klaasse says, "you're not a participant in the discussion."

Referring to Smith's professorial role as "part actor, part entertainer, part storyteller--and true educator," students have responded over the years by showering him with Superior Teaching Awards: more than two dozen so far, with no sign of a letup.

"He has a tremendous ability to take esoteric concepts and translate them into basic and real terms that we can all identify with," says Amy Leenhouts Tait, a 1985 graduate of the executive program who is now executive v.p. and COO of Home Properties of New York, Inc., on whose board Smith currently sits.

"Cliff inspired me to do a Ph.D. at the Simon School," adds Amy Hutton, another former student, now an associate professor of business administration at Harvard Business School. "He finds a way to simplify complex concepts in finance so that others can share in the knowledge. He has a way of bringing the material to life."

Smith, who turns 52 in December, has had 40 years to sharpen his financial skills. He began his professional career as a 12-year-old employee of the Bank of Greensboro, Georgia (pop. 2,500), where his father was president. Working part time over the next dozen years, he progressed from burning old bank records to running a teller's window and sitting on a loan desk. The young Cliff learned early about competition, the importance of taking care of customers, and asking questions when you don't know the answers.

Decades later, Smith still thrives on questions, and his students have dubbed his style "Socratic Method Lite." It's all part of his probing, challenging classroom style.

"Those who are thinking about making finance their home for the next several decades," he says, "want to walk away from here with a way of thinking about financial products, markets, and business decisions that makes sense. We try and focus on the bigger picture, try to build a broad, productive framework.

t the same time," he goes on, "it's crucial to illustrate what we're talking about with specific transactions. I've got a file drawer full of things I've clipped out of the financial press because I think the detail they illustrate is terribly important in trying to convince students that the broader framework would specialize down to a particular decision."

It's in drawing on those illustrations that Smith gets to shine, to use his graphic verbal imagery and real-life examples of often absurd behavior to drive his points home.

He takes pride in how his students fare in their careers, and in how well the Simon School prepares them by integrating the business disciplines.

When Simon graduates meet up with the products of older and larger B-schools like Harvard, Wharton, and New York University, Smith says, they often report, in essence: "We're running circles around these other guys. We've got a way of thinking about these problems that's more productive than theirs."

mith received his own education at Emory University (1969 bachelor's degree in economics) and the University of North Carolina at Chapel Hill (1975 doctorate, also in economics). He came to the Simon School as an assistant professor in 1974 and became a full professor in 1986 and Clarey Professor of Finance and Economics two years later. This fall he was appointed the first incumbent of the Epstein chair, established through a major contribution from Henry and Louise Epstein. A 1980 graduate of Simon's Executive Development Program, Henry Epstein recently retired as senior vice president of Staples, a leading office products supplier.

Ronald Hansen, associate dean for academic affairs at Simon, recalls Smith's interview before he was invited to join the faculty. Smith had recently seriously injured his leg in a bicycle accident and had to survive the double handicap of navigating his way on crutches, in the snow. Despite that bit of adversity, Hansen says, Smith shone.

"He came to Rochester really wanting to learn from his colleagues," Hansen says. "He constantly interacts with them--both learning and teaching. As a result, his knowledge spans a wide breadth."

Smith's work with Simon's Executive Development Program--which draws business people from many areas of the corporate world--has further enabled him to broaden his own expertise and his ability to translate into concrete images the financial literature that may lie outside the narrow bounds of his own discipline, Hansen adds.

Smith puts it this way: "We don't have a magic wand here at the Simon School. We're not going to take complex business problems and turn them into no-brainers. Being an effective manager in a major corporation is a formidable job. One of the things we can do is give people a lot more focus, suggest the right questions to ask, teach them what sorts of interaction to watch out for.

"One of the things that I see when I talk to former students or get involved with consulting projects," Smith observes, "is that most business problems don't show up with nice, tidy labels attached--this is a 'finance problem' or that's an 'accounting problem.'

"If there's an important facet of the problem that you overlook, it's likely to come back and bite you in the behind."

Smith is frequently called on by the business press to offer one of his characteristically unflinching opinions on some aspect of local or global finance, to illuminate a corporate move, to propose a strategy, or to question the emperor's dressing habits.

During a roundtable discussion at the Rochester Business Journal some years back, Smith's meticulously argued opposition to raising the minimum wage sparked such heated reactions from his fellow panelists that observers wondered whether fists would fly.

Clearly, Smith values lively debate among intelligent people. He recalls the late Bill Meckling, the dean who hired him at Simon: "He expected you to contribute thoughtful analysis to whatever the conversation was, whether a faculty seminar or a lunchroom conversation. Bill wound up infuriating some in the business community for expecting the same of them."

On investing, Smith says:

"A lot of trading is a strategy that will make brokers better off and you worse off." He advises individual investors to give up trying "to find overlooked nuggets in the riverbed," and encourages them to manage risk by focusing on mutual funds, to exploit the tax advantages of pension accounts and municipal bonds, and to take a long view. After all, he says, "there's not a five-year period of time in the U.S. markets, including the crashes in 1929 and 1987, where a well-diversified investment in stocks would have lost money."

n government interference in employment contracts:

"There are lots of good reasons to provide health insurance that don't have anything to do with a law that says you must. Worker safety is something that George Eastman worried about long before there was an OSHA. The only way I'm going to get workers to work in a riskier environment is if I pay them more," Smith says. "Well, that's expensive. But it may be cheaper than making the workplace safer. There's a level of risk beyond which it makes little sense to reduce further."

On charges that businesses respond to short-term shareholder demands to the neglect of their long-term health:

"I think that's overblown. Merck Pharmaceuticals, for example, with a high share price, has a huge R&D program. What's going on in those R&D labs is contributing far more to costs this quarter than to revenues this quarter.

"The stock market, I fearlessly forecast, would react incredibly negatively if Merck were to shut down their R&D activities. The market is interested in whether the firm is sensibly managing the business opportunities it faces, whether they're doing more with dollars today than shareholders could do with those same dollars if they were distributed in dividends. Shareholders pay a premium for a claim on that whole stream of future dollars.

here are certainly special cases where a short-term focus has been a problem," he adds, "but I disagree that this is the biggest problem in the business community, that it's rampant across the board."

Smith's opinions are strong, and he has plenty to back them up--not only his own research, but broad experience in subjecting his ideas to the scrutiny of others. His sense of teamwork is reflected in his long list of collaborative projects.

(Quick to share credit, Smith says: "When the dean's office starts handing out bricks and mortar to the faculty at this school, what he expects us to build are bridges, not walls. I think we do that more consistently than any other business school I know.")

Smith is currently working with Simon colleagues Jerold Zimmerman and James Brickley on a second edition of their textbook, Managerial Economics and Organizational Architecture, first published in 1997. Last year also saw the publication of another Smith collaboration, Derivatives Handbook: Risk Management and Control, which he co-edited with Robert J. Schwartz of the Republic National Bank of New York.

Smith has a dozen other books to his name, plus more than a hundred journal articles and published papers. He is current advisory editor, and former editor, of the Journal of Financial Economics and holds editorial or board positions with nine other journals. He also is a prolific researcher, with numerous awards to his credit. (His work is "path-breaking," says Joel Stern, co-founder and managing partner of Stern Stewart & Co., a New York-based management consultancy, who refers to him as "among the top 15 scholars in finance.")

Smith is hard-pressed to name anything about his job he dislikes, other than, admits this native Georgian, "Rochester's cold winters." But the city's wealth of cultural institutions, good schools, and high quality of life combine to make it, he affirms, "a very special place to live, work, and raise a family."

As for retirement, Smith predicts: "For me it's probably going to be more fading into the sunset than just stopping one day."

Away from work, Smith's time is often devoted to his kids--Alexander, 13, and twins Morgan and Taylor, 11. His wife, Bernie Todd Smith, is a medical librarian. A few years ago, the family spent a month in Amsterdam while Smith taught at the Simon School's executive program in the Netherlands.

Other overseas assignments have taken him as far afield as New Zealand, where he served on an advisory committee to the auditor general. His consulting experiences have given him firsthand insight into global markets, not to mention more fodder for his file drawer of stimulating cases.

hat about critics suspicious of folks who build careers focused on moving money around? Doesn't business have some responsibility to use its resources and clout to make the world a better place?

Smith reaches into his bag of metaphors and pulls out the image of the violinist hammering a nail.

"The business community is good at serving customer demand," he says. "If you try and force it into something that it's not good at, you're likely to be less pleased with the outcome than if you kept it focused. If you go to the Rochester Philharmonic and tell the concertmaster that there's a loose nail, you might try and force him to hammer it down with his violin. In that case the nail is unlikely to be effectively hammered, and the violinist will be dramatically less effective than a carpenter would be."

There the maestro of derivative securities rests his case.

Rose Ericson is a Rochester-based freelance writer.

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