How Inequality Hurts the Market — and What Investors Can Do About It | Columbia Professor Explains
Jon Lukomnik, adjunct professor of sustainable investing at Columbia University, breaks down how inequality weakens the economy, prolongs recessions, and amplifies market risk. He outlines the four key indicators of systemic risk, highlights how investors are focusing on reducing inequality, and challenges business schools to connect theories to the realities of the market.“If you want to decrease risk and increase value, you have to go to the real world to do it,” says Lukomnik.
Key Takeaways:
– The level of the market affects 75% to 94% of long-term return.
– The health of the economy determines the health of the market.
– There are three major impacts of inequality on the economy: decreased consumption, longer recessions, and increased country risk.
– There are four criteria for determining whether something is a systemic risk: consensus, relevance, effectiveness, and magnitude.
– Business education in this day and age fails to consider the real world when discussing systematic risks; the focus is on concepts like Modern Portfolio Theory.
Timestamps:
01:17 - Determining the health of the market
01:41 - Three major impacts of inequality on the market
04:48 - Four criteria for determining systemic risk
06:11 - Strategies current investors are using
08:56 - “Taking consideration of systemic risk gives you a lens to find opportunities”
09:27 - What business education fails to teach about systemic risk
Filmed at the 2025 Shift Business Workshop hosted by Shift and Harvard Business School’s Institute for Business in Global Society (BiGS), which focused on examining inequality as a systemic issue. Learn more about the economic impact of inequality and the Shift project here:
– https://www.hbs.edu/bigs/economic-impact-inequality
– https://shiftproject.org/ Receive SMS online on sms24.me
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