Business Education: How its Going

I was looking through my last several blogs and realized that my tone has been a bit, well… doom and gloom. I wanted to take this opportunity to tell you that it’s actually going really well. Yes I am tired, yes Business School is full throttle and completely overwhelming. Yes it is hard, but it has been really enjoyable too.

I have moments like during my Accounting midterm when I realized that I am now able to read financial statements and know something as a result. I have epiphanies in Economics where I understand concepts that didn’t even occur to me… like when demand decreases the quantity sold goes down and so does the price. This seems counterintuitive, but now I get it.

Overall, the business education that I am receiving has been tremendous and I wouldn’t trade it for anything. In addition to the classroom experience, there are the extracurricular activities like a possible business plan competition in Beijing in the spring, a VC meet and greet next week, and mentorship program. These experiences are only possible at this stage in life by having the “student” pass.

So, am I happy I am here? Yes. Is it worth the GMAT, the application, the essays, the letters of recommendation, etc? Yes.

When I look over the last 5 weeks (it seems so much longer) and think about how much I have learned, I am so excited to see where I will be when the program is complete. It is an amazing thing to be on this path, and it’s great to have you with me.

…the living room is painted. On to the crown molding!

The Second Half of the 400

Last night in class, my Accounting professor shared a philosophy that his high-school track coach had about the 400m dash. It goes something like this, 

"Run the first 200 as fast as you can. When you get to the last 200... run faster."

He said that this mantra is applicable to our Financial Accounting course...

He then went on to explain how what we had done so far (Assets) was really pretty easy. He said that what we were about to get into (liabilities and Owner's Equity) was the hard stuff. We all just stared at him in disbelief.

...rewind to justt 1 hour before this proclamation of things to come in the Accounting class. It was at this moment that I had another "oh, no" (not to be confused with aha) moment in my Economics class. The Professor said these exact words, 

"Do you understand these short run and long run cost curves? :::blank stares::: Because if you don't get this your really in trouble. It's about to get really hard, and this is basic."

I wish I had taken a picture of the white board to show you. The diagrams behind him might as well have been pictures of spider-webs with random x and y axis' placed in different spots on the board.

And then to boot, he gives us a homework assignment that is due the day of the midterm. 

Already demoralized from the Economics class, I went to my Accounting class and got the second half was harder than the first speech. So, I am wondering about something. Do professors get together and talk about what they could collectively say to depress their students. Is the second half always harder than the first? Because, honestly I usually find the second half easier. 

I'm not sure what is going on, but I am sure of something... my last final is on December 9. That final is followed by 3 weeks of splendid vacation, and I am starting a countdown.

The Business School attacked... and I survived

For those of you who are regular readers, let me start by asking for your forgiveness for leaving you in the dark the last week. 

You see, it's been a whirlwind since my last entry. I studied for my accounting midterm, took my accounting midterm, began studying for my Econ midterm, and did the prep work (taping, spackling, etc. in order to paint my living room).

Let me start with the midterm...

Well, we had been warned from the first day of the quarter that the only way to learn accounting was to put lots of time in reading and studying (preferably in a hard chair). And I did put that time in throughout the semester, so I felt pretty good going into the midterm exam. In fact, I really didn't cram for it at all. I just did the practice test, stayed for the after class study session, and skimmed over my notes. 

Now remember this exam was a take home test. It was open book and open note, but the kicker was that it was fifteen pages of questions (about 40 questions). All of them were "short" answer. I had 48 hours to complete the exam and e-mail it back o the professor.  Welcome to Business School.

Thursday evening rolls around... After a full day of work and an Econ class, I have enough energy to outline the financial statements and do the first 3 pages. Friday I went to work (left home at 5:30 AM) and waited to work on the exam until I got home. After about 3 hours or so I finished the exam... in pencil. I then typed up my answers inserting graphs and correcting along the way. So I went into Saturday with a completed typed exam, but here is where the curse of the take-home reared it's head, the "re-check". Over the course of my "work" day I checked the exam 3 times. This took me 8 hours off and on in between doing work stuff. I finally sent the exam off to the professor at 4:00 PM.

After sending it off, I talked to one of the other guys in my group about the test and then decided to recheck my answers (I had already turned it in mind you). I found a mistake, but wrestling with my conscience I decided that I would not have found the error had it not been for my conversation with another student, I decided to let the submitted exam be the final one. Score one for the Business School honor code.

After that I enjoyed a nice dinner out with my wife (Ramen Noodle Bowls) and slowly came down from the exam high. Unwinding from a 3 day, 11 hour test wasn't easy. 

So that was Saturday night. Today is Monday and my group is gearing up for an exciting 10 day countdown until the next exam, ECON. And believe me it's much scarier than the capital letters I just used to describe it. I'll try and keep you updated as I prepare for this one. So stay tuned as we move from unearned revenue to shifts in demand. Oh yeah... I'll let you know how the living room comes out too.

Goodnight!

Business Education : Meet Joe the Plumber

First, check out this video...

Am I the only one who thinks this Joe the Plummer guy has gained way too much celebrity? Well, I think its because the facts have been mixed up. I'm going to attempt to use my business eduction to evaluate the situation. Here are the assumptions I think people are making about Joe the Plummer and Obama's tax plan:

1. As the business owner, he would be part of the middle class

2. Obama would raise the tax rate on all of his income

3. Obama's tax is assessed on revenue

4. Joe's income tax will increase significantly

I am assessing this from a purely economic standpoint.

Here we go...

1. As the business owner, Joe would be among the top 2% of earners in the nation.

2. The additional tax for Joe would be on the amount over 250K/ year. In the video, Joe estimates that the business would make 250K to 280K. Therefore the additional tax would be on 0-30K/year.

3. Obama says that the tax is based on Revenue. This is actually not correct. All businesses, like people are taxed on Revenue - qualified expenses (write offs). For Joe's business this means "net income" or "profit". Joe got it right when he said the business "makes about...", he was talking about net income.

4. Based on our answer to number 2, Joe's income that will be taxed at the new rate (39% instead of 36%) is 0-30K. That means that the additional tax that Joe will be responsible for is 3% of 0-30K or $0.00-$900.00. This will be on top of the $78,000 in taxes he would currently be responsible for assuming a net income of $280,000.00

So, is Joe an "average Joe"? Is the additional tax significant? Should Joe refuse the additional 30k in business because of an additional $900 in tax liability? Should Joe not buy the business because of the higher tax rates?

I say who cares. Shame on the media for blowing this so far out of proportion (i.e. follow up interviews with Joe, videos, fan sites, etc.). Shame on the Obama campaign for mixing up revenue with net income and saying things like, "spread the wealth around" - C'mon Obama, it's time for a business education. Shame on the McCain campaign for making a guy who will be financially elite (statistically) their champion for the middle class - C'mon McCain, what happened to the straight talk express. And shame on me, you, and the rest of us for paying attention to it.

Attack of the Business School: First Midterm

If you have noticed my entries occurring more and more on the weekends, it’s because my weeks have become completely squashed. Sometimes remembering them is like trying to remember what you saw while zoning out during a drive that you have taken 100 times before.

This week was just like that, and included the following evening activities:

Monday: Group Meeting

Tuesday: Class

Wednesday: Mentor Meeting and Group Meeting

Thursday: Class and Sleep (Finally)

This brings us to Friday... I settled down to start studying for the Financial Accounting mid-term. The test is next week on Thursday.

The professor was kind enough to provide us with a practice test from a past class to study from. He posted the practice test, supplemental materials, and solutions on an online education site called Blackboard.

I printed the practice test on Friday and spent about 2 ½ hours working the problems. I scored about a mid C without consulting my notes. I feel like this is a pretty good starting place. The plan now is to study all of the material (Revenue, Acc. Receivable, Inventory, Long Lived Assets, Intangibles, and general info) in the first part of next week. Then I’ll rework any of the practice test problems I missed or was iffy on.

…and actually while studying for this accounting midterm, I became very encouraged. Here I was flipping through the cash flows statement, the income statement, the balance sheet and other addendums, and the numbers actually meant something to me. I am beginning to understand which figures are solid and which ones can be manipulated by company management. The numbers are beginning to have life. 6 weeks ago I had little, if any, knowledge of what the financial statements really meant, now I am beginning to feel literate.

So, here I go… T-6 days and counting until my first mid-term in Business School. I’ll let you know how it goes.

Business School Returns: The 500 Level Course

For the first few weeks of this quarter (my first quarter in Business School) I have been under the impression that I was taking one relatively easy course and one difficult course-Economics 500 and Financial Accounting 500 respectively. But during the last Economics class, the professor said something that was a little bit scary... 

"That ends the principle's portion of the class. Now we are going to move on to what is commonly referred to as Intermediate Economics and we will dive in even further in the last part of the quarter"

After the professor made this statement he proceeded to explain indifference curves and the indifference map using calculus (not a required prerequisite). This was a far cry from the shifting of supply and demand curves, which we were talking about just ten minutes earlier!

At this point in the class, my face and the faces of most of my classmates went blank and we all began to slowly slink into our chairs. Although, it is comforting to know I wasn't falling down the black hole alone, I began to get very worried about the course. 

The problem was that I didn't have the right expectations of core Business School cirriculum. 

The core classes (i.e. accounting, econ, stats, etc.) end with 500. But what 500 really means is... everything you would learn in 101/201 jammed into the first 3 weeks, everything you would learn in 301 in the next 3 weeks, and 401+ in the last 3. These courses are not designed to be "refreshers" or to "cover the basics", they are designed to ramp up someone who has no business background in rather short order.

Here I was feeling great about having a business undergrad, but in 3 weeks I'm even with someone who majored in computer science or psychology. So much for the headstart.

So, what I do with my newly discovered wisdom? Study... hard, for both classes and count down the days until the quarter ends.

I'll let you know how it goes...

Watching Rome Burn: Taking a Break from Business School to Gather My Thoughts

Well, if you have a pulse, you have probably heard the news about the U.S. economy and the broader world economy this week. So what does it mean when the DOW loses 23% of its value in one week? (I picked a great time to go to business school)

I think this depends on your situation...

First, the DOW 30 aren't the only stocks to lose there value. The S&P 500 and most major mutual funds have also been hacked. The only index that hasn't taken a huge hit yet is the NASDAQ which is down about 3%, but tech earnings are coming in today. We'll see how long it lasts.

Here are two examples of some real life impact of all of this...

My Father who retired two years ago is in dire straights right now. He is 66 and is making small draws on his 401K. In 4 years he will be required to withdraw a higher percentage each month to comply with the 401K laws. So what's the problem with that? The problem is that the shares are undervalued. What he is drawing today may be worth twice as much in a few years (and was worth twice as much a few weeks ago). Since he is in very good health he is wondering if he might outlive his retirement. He's lost about 40% of his portfolio value. The bottom line is he is now selling about twice as many shares to collect the same income from his 401K.

I am in my late 20's and had about 30K in the market going into the last few weeks of turmoil. My new value is about 19K. I am invested in a range of mutual funds inlcuding emerging market funds. The one key difference for me is that my retirement horizon is at least 30 years. This means that while the shares I own are worth less, I get to buy new shares at the low price. If my monthly contribution used to buy 10 shares, it now buys about 20. So essentially, I am buying shares on sale- or at least that's what I tell myself. When the market returns, the average price I paid should be quite low, and I will realize a huge gain.

...yes I am trying to find the silver lining, but the fact of the matter is this is depressing. No one likes watching their or their parent's retirement halve in a matter of months, and recssion is a scary thought. What if I lose my job? What if my house is worth even less? What if I have to foreclose?

So, for my part, I'm going to try not to be affected. I've already turned off the news and I am beginning to think happy thoughts. Maybe this is the real cure. If we all fight the histeria, we could tip confidence (Malcolm Gladwell Style) and see a rebound in the markets. If the government can solve the credit crisis in the mean time we will be high flying again.

Sound like a plan?

Business School Begins: Meanwhile Back at the Office

Well, I am 9 days into business school and already fitting that profile of the fully exhausted Grad student. But, unlike some of my peers I still have that good old day job to go to, and this week the day job was more interesting than usual...

This past week, in the midst of slaving away at work, an all-day meeting was scheduled. It turns out that our regional VP and HR guy wanted to come talk to all of us about a recent employee survey that was conducted. 

Rewind... This was a basic anonymous survey with questions like, "do you have the tools you need to do your job?", "does your manager support you?", "would you recommend your company to a friend?", etc. etc. Well, I took the opportunity to inject some truth including a full page of comments about all of the issues that bothered me. In fairness I included some of the more recent positive changes as well.

OK, back to the meeting... We split into two groups... senior and junior managers- I am the latter. When the powerpoint fired up with the response graphs and comments I quickly discovered that I was one of the only people that had left comments. In fact, 70%-80% of the comments on the screen were mine. This was a little concerning at first, but as the HR guy (our moderator) started walking through them, people began to open up. 

One person agreed with my comment about upward opportunity. Another one began to elaborate on the micromanagement we all endure. A third person echoed my thoughts on the desire to get involved outside the operation (side projects). A fourth person discussed the centralized decision making - and the lack of junior level manager involvement. This went on for two hours! We went through the negative and the positive - I felt such a huge amount of relief. I wasn't crazy... I was just the only one speaking up.

After our productive discussion, the two groups came back together. The next step was to present a summarized version of our comments to the senior managers and vice-versa.  As expected, the senior managers began to ask for specifics and this is where the conversation broke down. No one was about to stand up and say, "yeah, so last week when you were micromanaging me...". It just isn't realistic.  So, our Senior Director, who is very intuitive, brought the meeting to a close and thanked everyone for their time. 

A strange ending to the day, but early this week (a week later) an e-mail came out from the senior director outlining the formation of teams to breakthrough the issues the junior managers brought up. What an amazing thing. We were listened to and changes are already starting to occur.

I feel like this is an important sequence of events that I will remember long into my career. I guess you don't learn everything in business school.