The complexity of today’s problems – from financial markets to national security – demand more quantitative thinking and better assessments of risk, business leader John Drzik told attendees of the 10-year anniversary celebration of Princeton’s Department of Operations Research and Financial Engineering (ORFE).
“I see ample applications of the ORFE discipline – in finance, in energy, in healthcare, in the public sector – any place there’s a need for risk measurement and management, resource allocation and decision-making under uncertainty,” Drzik said. “The demand for quantitative methods for approaching these areas is going to grow.”
Drzik, president of the international business consulting firm Oliver Wyman was the keynote speaker at the anniversary celebration on April 23. More than 50 alumni as well as current students, faculty members, business leaders and academic leaders attended.
Princeton University created the ORFE department in 1999 to focus on using mathematics, statistics, and the tools of engineering to evaluate risks and optimize decision making in complex systems. In its first decade, ORFE quickly became one of the most popular undergraduate majors while doubling its number of faculty members and graduate students.
“It’s clear that it’s been a success by any measure,” said Drzik, who graduated from Princeton with a bachelor’s in engineering in 1983.
Beyond these numbers, however, the department offers links between engineering and the social sciences that are important for achieving meaningful solutions to complex problems, Drzik said. “It is a great fit for Princeton in that it bridges the liberal arts and traditional engineering,”
The recent financial crisis demonstrates the need for a mix of technical and non-technical perspectives, he said. While the mathematical models of risk that are often blamed for the financial crisis could be improved, the far greater issue was the misuse of models and general failures of governance, he said. “The right questions weren’t being asked at the very top of institutions or for that matter in the regulatory community.”
Drzik said the ORFE department is well positioned to prepare leaders who understand complex models yet have a broad education in policy and the humanities.
The breadth of issues addressed by the department was demonstrated in the day’s events, which included a panel discussion on market-based solutions such as cap-and-trade to address energy and climate change. Led by Professor Rene Carmona, the panel included Rick Andlinger ’80, president of the investment firm Andlinger & Co.; Peter Cartwright ’52, founder of Avalon EcoPower; David Crane, president and chief executive of NRG Energy; and Harrison Hong, the John Scully ’66 Professor in Finance at Princeton.
Drzik was also part of a panel titled “Lessons from the Financial Crisis,” which was moderated by Proessor John Mulvey and included Kemal Askar ’98, managing director at JP Morgan; Gaye Erkan *06, vice president in investment banking at Goldman Sachs; Frank Fabozzi, professor of finance at Yale University; and Adam Berger *95 of Princeton Focused Investments.
The anniversary event took place in Princeton’s Carl A. Fields Center as well as Sherrerd Hall, the recently completed building that is home to the ORFE department. Acting department chair Ronnie Sircar said the event proved Sherrerd Hall to be an excellent backdrop for bringing people of various disciplines together and fostering conversation, which is a harbinger of the department’s continuing success. “We are looking forward to the next successful 10 years,” Sircar said.
(Photos by Frank Wojciechowski)