IVCA Profile: Professor Mitchell Petersen of the Kellogg School at Northwestern University, 2024 Richard J. Daley Award Recipient at the IVCA Awards Dinner

December 4, 2024

The IVCA announced their 2024 honorees at the upcoming (December 9th) IVCA Awards Dinner recently, and the recipient of the Richard J. Daley Award is Mitchell A. Petersen, Glen Vasel Professor of Finance and Director of the Heizer Center for Private Equity and Venture Capital at the Kellogg School of Management at Northwestern University.

In submitting his nomination, his colleague Karin D. O’Connor (Clinical Associate Professor of Strategy and Executive Director of the Heizer Center) noted that Kellogg alums have expressed that Professor Petersen is “not only a world-class finance expert but also a passionate and dedicated educator whose voice will continue to guide [them] throughout their lives.”

Professor Petersen joined the Kellogg School faculty in 1994 after several years with the Booth School at the University of Chicago … his academic and research credentials are impeccable. He earned his PhD in Economics from MIT in 1990 and is noted for his writing on how the cost of information, technology, competition, and taxes affect how firms raise capital and fund their projects. For this work, he has been awarded both the Smith Breeden Prize for Outstanding Paper from the Journal of Finance and the Michael Brennan Award for Best Paper in the Review of Financial Studies.

The Richard J. Daley Award, a traditional IVCA honor named for the former Mayor of Chicago, and acknowledges a single individual who has given direct and extraordinary support to the State of Illinois by participating in or being an advocate for the Venture Capital and Private Equity industry. As Professor O’Connor added, “I can say without hesitation that his advocacy and contribution to the Private Equity and Venture Capital community in Chicago, the State of Illinois and beyond make him truly deserving of this honor.”

In a letter of support from E.F. “Skip” Heizer, Chairman of Heizer Capital, he spoke of Petersen’s efforts to expand the Heizer Center, named for his late father Ned, and wrote the Professor Petersen is “one of the finest people I know. He is highly intelligent, a thoughtful yet soft-spoken communicator, and always a willing source of support.” Mr. Heizer will present the Daley Award to Professor Petersen at the Awards Dinner.

The IVCA recently spoke to Professor Petersen for insight into his career.

IVCA: The Richard J. Daley Award acknowledges your contribution to the Venture Capital and Private Equity industries, and in contribution as it applies to the State of Illinois. What in your point of view has been advantageous or lucky for you to be based in Illinois and more specially the financial and academic power centers of Chicagoland?

Mitchell Petersen: I grew up in Iowa, and so Chicago was always the big city … huge, beautiful, powerful and a little intimidating. Chicago of course started as a transportation hub due to the lake and the rivers, and then the railroads. Manufacturing was the engine of the United States, and that was huge in Chicago. As the economy coalesces around a finite number of economic hubs, we are still fortunate to be in one of the most important of those hubs in the U.S.

Chicago is still a hub for manufacturing, but it’s also a leader in publishing, insurance, transportation, food, and of course finance. Chicago has several world class universities, two of the top MBA programs in the world, in addition to a vibrant financial community all the way from the startup/Venture Capital end of the spectrum to the number of large public firms who are based here, and of course the internationally important financial exchanges. All of these elements have created the foundation for my education, my advocation and my participation.

IVCA: When you began your journey as an educator, what philosophical principles did you develop in your early career that you still apply to now, and why do those principles continue to be a universal in your approach to professorial interaction?

Petersen: When I started graduate school, and this sounds heretical, but I didn’t plan on being a professor. When I changed my mind, the plan was to be an economics professor. When the job market told me I should make another switch, I became a finance professor.

For better or worse, that meant I hadn’t really thought about teaching, so I learned a lot about the profession in the early years, some from other junior faculty such as Steve Kaplan … another Daley Award Winner … and of course from my students. I realized early on that teaching facts and mechanics was not where the educational value was added.

When I think about teaching, I want to people to see the vastness and the chaos of finance and be able to organize into ways that are useful for actual business decisions. If they learn logical structures, why things work, and how to take amorphous problems and ask precise questions, that is an enduring skill.

I began before digital technology made access to factual material universal. As technology evolves, as data becomes more overwhelming, the value of having an intellectual structure built on first principals that allows you to take an amorphous problem and turn it into a precise question is a skill that will never fade.

IVCA: In all that early development, where did you find some surprising advice?

Petersen: My Mother, who was a history teacher herself, also told me to listen more than I talk. That is hard for a professor … we often like the sound of our own voices. I have learned to listen, not just to the question that student asks, but to the question they are truly asking.

IVCA: Your research pursuit is in the higher levers of creating investment evaluations. How have those levers changed since the year 2000, and what element has emerged to become of tantamount importance that no one would have anticipated at that turn of the 21st Century?

Petersen: Half of what I teach in and outside of class has not changed in hundreds of years … people are risk averse, some more and some less. But the other half of what I teach changes every year. As referenced before, one of the largest and more explosive changes is the digital access to facts. Early in my career, faculty were simply suppose to know things. What was the return on the stock market last year, for example.

The minute the internet came online, then came online tutorials, and now maybe AI, the collection of facts has been delegated to students, thankfully. The purpose of the faculty and the classroom experience can now focus on what was always important, which is providing context and a way to understand those facts.

IVCA: How does context relate to an approach to modern finance education?

Petersen: Much of what I teach is valuation, and those that know a little bit about valuation, think valuing a firm is building a DCF spreadsheet in Excel. That is one of the tools, but that is not the objective. The objective is to use the numbers and the spreadsheet as a tool, the means to the destination.

There is a line from one of my favorite movies, ‘The Matrix.’ Keanu Reeve’s character Neo is staring over the shoulder of another character looking at an old fashioned CRT screen, with incomprehensible symbols are streaming down the display. Neo asks how you make sense of this. The person at the screen says at some point you can look through the numbers and see reality. That is the point of the spreadsheet and what we teach now and going forward … If you can look through the spreadsheet you can see the reality of business … its competitors, its employees and its customers.

That is what the members of the IVCA do … they invest in and run businesses. Like my students and I, they take a tidal wave of data and use it to understand not just the business as it is, but what it could be. Honestly, this takes a lot more creativity and vision than I have. My role as an educator is to help launch those two elusive concepts.

IVCA: You are an acknowledged communicator and editorialist in your field and have sat on many editorial boards. There are certain expectations in writing for the financial world, but what would you express regarding your style that makes it distinctive?

Petersen: The language of finance is incredibly complex. Twenty percent of the reason it is complicated is the concepts are complex, and therefore the language inherits it. My job is to explain the concepts and demystify the language. The other eighty percent the reason the language is complex is it’s an entry barrier. The students I teach, the professionals I work with outside of Kellogg, and the broader community that I speak to through the media, tend to have a wide range of familiarity with the finance language and concepts.

They are all bright, but sometimes they do not know the words or the logical structures. I am supposed to be that bridge. So I use a variety of tools like equations, data, and pictures, but that is not what most people remember from our conversation or my classes. Most remember the many stories I tell. Stories are how humans have been retaining, processing, and communicating ideas for millennium. I find years after I have had a student in my class, the details may be gone, but the stories remain.

IVCA: How would you describe the state of academia, both in the area of expertise you work in, and in a macro sense in regard to student accessibility and the general society’s perception of higher education … especially as it gets increasingly expensive and less viable for certain sectors of Americans?

Petersen: I have not taught undergraduates, so let me answer a slightly different question, but with a common theme … is it worth getting an MBA today? I don’t think the answer should be ‘yes’ for everyone – and I would say the same thing for an undergraduate degree. This means you need to think very hard about what you want to do with your life, not just the job after business school but your long term career.

Don’t think about your job title, but rather what are the features of a career and a life that you value and are thus are you willing to sacrifice one or two years, along with the financial costs to get an MBA. I think the MBA can be enormously valuable if you get it for the right reasons.

The world is getting more complicated, not less. This is why it is a fool’s errand to go to school to learn a bunch of facts. You invest in an MBA for a number of hopefully enduring reasons. For starters, you continue to learn how to think and to ask precise questions. Each of the disciplines at Kellogg and eventually in any firms, they all have a different way of thinking about problems, often the same problem.

IVCA: That’s so interesting, what other elements of learning translates to real world applications?

Petersen: Well, for example, knowing how the person that manages my suppliers thinks about a problem versus how the person that runs Human Resources thinks. That is another lesson … learn how others think. The reason the Kellogg school draws from a variety of geographies, industries, job functions, and firm sizes, is because it is useful to tap into these different experiences in deciphering problems, devising solutions, and figuring out how to actually implement an idea.

And finally it’s about the ‘network,’ and this is almost a cliché. The point isn’t to be a part of a club, so you are ‘on the inside.’ It is an opportunity to develop hopefully deep and long-lasting relationships throughout your life – both professional and personally. My life is much richer due to the students that have been through my class, and I hope that some of them would say the same.

IVCA: Finally, in your observation, what is the status of the State of Illinois and Chicagoland as a leader in the financial world, and how do you think associations like the IVCA can continue to advocate for the state and our community?

Petersen: My personal view has always been that if we think we’re comfortably on top, we are toast. The city and the state have some profound financial challenges. However, I think the business community is strong, but more importantly I also think they are scrappy, driven and hungry.

Every year I think about what I want to do next, and I have chosen to stay in Chicago. That is in no small part due to the people I work with and learn from at Kellogg of course, but also in the broader Chicago finance community. That community, which includes the membership of the IVCA, have always been extraordinarily welcoming with their time, advice, and even brutal criticism. Our success is because of each other.

Because of all that, it is a supreme honor to be designated as the recipient of the Richard J. Daley Award.

For all information regarding the 2024 IVCA Annual Awards Dinner, taking place December 9th at the Four Seasons Hotel in Chicago … click here.