Why finance education is increasingly broke-and what you can do about it

Last week, Prof Jayanth R Varma(IIM-A Professor)  released a working paper on how finance teaching/research should change post the global financial crisis (full text worth a read-download it here). Pointing out the limitations of finance teaching(which impacts practice more directly than research), he basically argues that finance theory is 'not broke' as perceived, but that many ideas presently in niche fields should be integrated into the mainstream. The paper also argues that finance theory needs to integrate insights from sociology, evolutionary biology, neurosciences, financial history and the multidisciplinary field of network theory. And opposing any dumbing down, he argues that finance needs more(!!) sophisticated mathematical models and statistical tools.

While the paper reinforced my slight discomfort on the way finance is taught(some notable exceptions are most IIMA Profs, and textbooks by Damodaran/Myers & Allen etc), it gave me some brain food for  how students should react to this. And these are the points which I got.

1. Accept that Professors are constrained by curriculum limitations/class ability to understand. Unlike an executive education program where participants have more or less an equal base, the 2yr PGP program(with very few having finance background-education/work exp wise) presents challenges to Profs to get their point through in a 70min session. Instead, be aware of recent research via Google Scholar, SSRN, Research homepage of various sites like IIM-A, IIM-B, ISB, Stern etc or whatever suits your fancy. One can then bounce them off Profs/practitioners to get a better perspective.
2. Even if not explicitly covered in class/not important from exam angle, have crystal clarity on the assumptions and limitations behind the models used. For example, MM theory of constant WACC applies only under zero tax environment, fat tail risk skews the normal distribution etc. 
3. Respect other fields(specially those mentioned by Prof Verma) and build a more than passing acquaintance with research results in those fields. 
4. Learn how to apply the right type of math(once concepts are clear, modelling in Excel should not be too much of a pain). Get your hands around distributions with the appropriate statistical software.
5. Read extensively. No class can ever teach financial history in depth. It is for you to read, analyze and form your mental model to react when a situation comes. For example, those investors who panicked with the Japan earthquake, should have known from prior history of earlier earthquakes, how the Japanese economy/markets bounced back after similar disasters.
6. Visualize and do not remember formulas. This may seem heresy but in the Google Age when you can get up formulas with a simple search/reference books, devoting valuable brain space to mugging them does not make sense, if you known how to derive them from first principles. While you may still remember them, that should be because of practice/conceptual clarity and NOT because of mugging that formula sheet on the day prior to the exam.

Phew! That long post comes to an end. I did not intend to sound preachy(sorry if it comes out that way), but with topics close to your heart(as this one), emotions do come in.