The University of Melbourne paid tribute to a great athlete, an alumnus and an old colleague, Merv Lincoln, at Trinity College on Tuesday 10 May 2016. The service was fittingly followed by a procession of four laps (1 mile) of the athletics track.
Merv Lincoln, revered as the 11th person in the world to break the four-minute mile, was also much admired, albeit lesser known, for his business acumen. In 1954 he graduated with a Bachelor of Commerce from the University of Melbourne and later completed an MBA (1968) and PhD (1983). His career outside of athletics spanned business, media and financial consulting.
He worked at the Faculty of Business and Economics for a total of 21 years sharing fond experiences, learnings, and memories with his colleagues including Neville Norman who is still closely associated with the Faculty.
"I cannot add much to the flowing tributes of Merv Lincoln as an athlete and a gentleman, but I suspect few people know about Merv's academic achievements and contribution to business," says Neville.
Merv had a sharp mathematical mind and penned an incisive doctoral thesis, which included a masterly summary of the (flimsy) corporate default-risk literature, a thorough understanding of the pitfalls of published accounting data, the need to use ratios for analysis and interpretation, and material far more advanced than most (academic) accountants of that time could have handled: factor analysis and econometrics.
"Merv produced a mechanism to detect default risk that he always described as having 2 possible errors, as every credit rating facility has: (1) pronouncing an entity OK when it fails; and (2) assessing as high-risk an entity that survives and prospers. Every credit-rater agonises over these two potential embarrassments and Merv came across a device in his thesis to minimise these risks to the rater.
"But how could he market this device to help foretell risks and failures using accounting and related data? Merv started consulting to banks and financial institutions, writing reports for them and offering training sessions to risk assessors in the field, including credit managers in the leading banks. He ran workshops in most Australian capital cities. I joined him in many of these, providing macro-economic settings and also micro-economic risk-analysis briefings. Of course, we all had to go on morning and evening runs with him (on as much grass and as little concrete as we could find!).
"Merv's risk rating was overtaken by Australian Ratings (now trading as Standard and Poor's). Many would have thrown in the towel at this point. Not Merv. He went on to create Lincoln Indicators, which his son Tim has taken to prominence. His methods and models became part of modern practice to help credit assessment and default analysis as they were always destined to do.
"Vale Mervyn Lincoln, you went where few others have ever been: below 4 minutes for the mile, and passing a quite different milestone, in creating a world-class credit ratings facility that, if it were universally and sensibly adopted, we would not have seen the severity of the 2008+ global financial crisis."