Tannenbaum Talks About His Roots, Humor, Joys of Forecasting

As he prepares to take his leave as NABE president, Carl Tannenbaum agreed to talk about his economic roots and the evolution of his career in an early August e-mail exchange with NABE News.  He is a newly named NABE Fellow, joining Stanford economist John B. Taylor in that honor for 2007.

Closing in on 25 years with LaSalle Bank, Tannenbaum remains enthused about his job as chief economist for the Chicago-based institution, particularly as he travels to meet with clients and present his forecasts.  He writes weekly and quarterly reports for the bank, often taking a humorous approach to “make economics more approachable.”

“Markets can certainly be confusing and volatile.  But after nearly a quarter-century, I still feel energized by the constant evolution of circumstances,” he said.

During his five years of serving on NABE’s board, Tannenbaum has often been called upon by media representatives to interpret NABE surveys and comment on the outlook. Reporters have come to appreciate both his insightful commentary on economic indicators and the sense of humor he often uses in explaining market complexities. 

Here is what Tannenbaum had to say on his economic roots, his career, his culinary avocation, and other topics:

Q: What drew you to economics and when did that attraction take root?  And would you describe the evolution of your career?
I entered college as a would-be math major.  Over time, however, calculus and real analysis drifted too far into the theoretical ether for me.  Economics seemed to be a field that would make use of a quantitative background and bring me closer to the real world.

Further, my academic training came during a period in which the economy was front-page news.  The 1970s brought us energy shocks, wage/price controls, and a 21 percent prime lending rate.  We were reconsidering the role of monetary policy and markets in driving the business cycle, and I had the opportunity to learn from leading thinkers at the University of Chicago.

I was impressed back then (and continued to be) at the breadth of influence that economics has had in shaping history.  And the power that economic concepts have to explain social phenomena continues to expand.  I’ve never regretted the choice I made.

After spending my first two years forecasting sales performance for a major retailer, I joined the bank in 1983.  I was hired to build models that would simulate performance under a range of economic environments, with the results used to drive risk management.  While the bank, the models, and the markets have all evolved tremendously since I started, my group’s main objective has remained the same.

In this sense, I have always been more of an applied economist.  We are asked to prepare economic forecasts for internal use and external consumption, but we probably find more value in identifying scenarios that might vary from our central expectation.  The journey is perhaps more important than the destination for us when it comes to making economic projections. As the bank grew, more and more customers began asking for our perspective on business conditions.  I was asked to begin writing and speaking on the economy, and was given the title of chief economist in the late 1980s. 

Today, our work contributes to the pricing of credit and deposit products, assessment of our exposure to industry sectors, management of our investment portfolio, and strategic analysis of our industry.  Our alliance with ABN AMRO Bank of Holland has made these international exercises, and the contact with a variety of world markets has been another interesting aspect of our work.

Never a dull moment…in fact, I sometimes find myself wishing for a moment of boredom!

Q: It would appear from your economic commentaries and your president's letters for NABE that you find your work as chief economist quite interesting.  Could you describe what aspects of your job you find most compelling and most challenging?
I remain very engaged by my profession.  When your work covers the economy and the financial markets, you have the opportunity to dig into a broad array of topics.  I very much like the blend of theory and practice that is present in my work; I also draw energy from the fact that our studies have a very direct impact on decisions made by the bank.

I also take great joy in going out and visiting customers; one can learn a lot about the economy from what business people are saying.  Naturally, it's important to look at economic data, but you have to find a balance between what the data tells you and what clients tell you.

Our core clientele is composed of small and medium-sized businesses, and much of our writing is aimed at this audience.  The managers of these companies are very astute, but may not follow each day’s economic announcements closely.  We try to keep them up to date and “connect the dots” so that they understand trends that will affect them.

We invite clients in to what can be tough subject matter by taking a humorous approach. While I like to think that I can hold my own in more intricate economic discourse, I suspect that our publications must seem highly unsophisticated and irreverent to more learned peers.  Yet I like to think that our style makes economics more approachable for those who do not read the Wall Street Journal every day.
Keeping up with a broad range of industries and countries can be very, very challenging.  Fortunately, I have the aid of ABN AMRO’s network of analysts, a talented group that provides terrific coverage.

It is also challenging trying to anticipate where risk will next manifest itself.  No two episodes are exactly alike, and it is much harder than it used to be to trace cause and effect.  This is because so many of the prominent players in today’s financial landscape (such as hedge funds and private equity firms) are far less transparent than the banks who used to dominate the provision of credit to the economy.

Q:  You recently gave an interview that focused on your culinary side. How did you become interested in cooking? 
I have been cooking since I was 10.  My parents both worked, so if my brother and I wanted to eat, we had to get into the kitchen and make dinner ourselves.

What began as a necessity has become an avocation. Cooking provides a relaxing alternative to what I do professionally: when you are an economist, you may work on something for a long time, and it may be a long time before you know whether you were right.  When I cook, I go into the kitchen and get a result in an hour or two.  And the feedback is almost instantaneous.

I also feel as if I have some semblance of control in the kitchen, power that I certainly do not have over the financial markets.

For the longest time, I’ve always thought that it’s a very personal statement that you enjoy someone else’s company when you cook a meal for them.  Among my greatest pleasures is sitting at the table watching people enjoy something that I’ve prepared.  I’ve cooked for friends in many U.S. cities, as well as in Europe and Australia.

Q: How would you sum up your involvement with NABE, especially over the last year as you have represented the organization as president?
I’ve been fortunate to meet a number of prominent colleagues through the years, and to become involved in discussions of economic policy.  NABE has been, and will continue to be, the center of my professional network.

It has been an honor to serve on the NABE board for the past five years, and to have the chance to give something back to an organization that has been so important to me.  During that time, I’ve had the opportunity to become involved in almost every aspect of our operation, and I have enjoyed each assignment greatly.

I hope our members are proud of the work that NABE does on their behalf.  NABE’s efforts to foster dialog, disseminate information, improve economic statistics, and raise the profile of business economics have all reflected very well on our profession.

Serving as NABE president is certainly a great highlight of my career.  I was very fortunate to have a group of hardworking colleagues on the board this past year, who deserve the lion’s share of credit for what we have achieved.  They have my great thanks.

I’ll look forward to remaining involved with NABE in the years to come, and to furthering our mission in any way that I can.