Heading Back to Business School – One Last Time!

Hello, it has been almost a year since my last blog entry! First, let me apologize for taking so long to write- it has been a crazy year. Since my last entry, I was hired on permanently at the hi-tech company I mentioned interviewing for in my last entry. Then I got a taste of the 60 hour work week. This combined with business school worked out to a temporary hiatus for this blog.

So, here’s what happened this past year... I moved from core classes to electives, which has allowed me to concentrate in Finance. I’ve taken classes like Entrepreneurial Finance and Problems in Corporate Financial Planning as a part of that emphasis. In these classes, I focused on things like establishing a healthy growth rate, financial forecasting, capital structure for corporations, venture capital, and more. Most of this work was case based and a solid challenge. Another highlight was a leadership course centered on the 6-domains leadership model. The class was half academic and half workshop – very practical.

So where does that leave me? Well, it leaves me with 1 quarter of business school remaining! I graduate in about 11 weeks. Amazing. It seems like just yesterday I was blogging about my experience taking the GMAT. Now, I am ready to hit the road – MBA in hand. So, look forward to some more entries this quarter. Topics will be centered around pricing, a business idea that I am pitching as an independent study, and as always current events in the business world.

So stay tuned… there is a lot to say as I head back for my final quarter of business School.

7:45 AM Tomorrow

I think I wrote in a previous entry that I recently interviewed for a permanent position with my current employer. I have been a contractor for the last 10 weeks or so...

Well, I received an e-mail today from my manager asking that I meet with her tomorrow morning at 07:45 AM. This is 5 days before she said I would get an answer on the interviews. As soon as I got the e-mail I felt nervous. I started immediately going through a mental list of possibilities.

Here is what I came up with....

1. The other candidates that were interviewed for the position weren't up to par and I am going to be offered the position.

2. The other candidates were far better than me and I am going to be told that I am no longer in the running.

3. The number I put in under "expected salary" on the pre-interview questionnaire was too high.

4. Something completely unrelated to the interviews.

I have gone over this list several times in my head and have come to an extremely novel conclusion... Are you ready for this?

I can't change the interviews and there is nothing I can do about what will be discussed tomorrow, so I need to let it go. I have tried very hard to do this and have mostly succeeded as of about 3:00 this afternoon.

Now, back to the business of preparing for school to start up again in 2 days!

My schedule this quarter is a bit weird. All of the classes are 2 or 3 credits so none of them meet on consistent days. One Tuesday I may have Spreadsheet Modeling and Business Strategy while the next I might have Ops management. This is instead of having 2 of the classes split the quarter. It is very confusing...

Well, I have a few chapters to read for my first day back. See you on the flip side.

Business School Favorites. IDEO!

Over the last several days I have been reading syllabuses, putting old school work in binders, buying outrageously expensive books, and getting my mind ready to start another quarter in business school. However, tonight I want to reminisce a bit about one of the best things I have seen in business school. It is a video about a firm called IDEO.

IDEO is a consumer product design firm that is located in Chicago (they recently moved from the silicon valley). That isn't the interesting part though. The interesting part is how IDEO develops new product designs and how they run their company.

They develop new product designs by putting together small teams of people with extremely diverse professional backgrounds. You might see a team with an ex-school teacher, an aerospace engineer, a paleontologist, a dentist, and a CFA on it. For the most part there are no hierarchical rules on the team and everyone is expected to come up with their own quirky ideas. They have a specific process for designing which involves a research phase, brainstorming phase, building phase, and refinement phase. During the whole process, the "adults" guide the group and insert deadlines. The adults are a few people picked to ensure projects stay on task.

The company culture is also very interesting. If you walk inside IDEO's offices you will see the wing of a DC-3 pertruding from the wall, bicycles strung up on the ceiling, and umbrellas blocking the glare on computer screens. Employees at IDEO are encouraged to build their workspces in a way that suits them. This produces the aforementioned decor and lots of other crazy stuff. It also gives employees a sens of ownership, and a say in how their company works.

The interesting thing is that IDEO is not only a design shop... they have also been tapped to offer advice on transforming company culture. The video that I link to above says that IDEO may be the workplace of the future. Well, it has been a few years since the video was filmed and I still don't see an airplane wing in my workplace, but maybe we have headed bit more in that direction.

Enjoy this business school favorite!

Business School in Real Life: A little bit of Customer Service Goes a Long Way

I just got back from a very productive and pleasing trip downtown. I was able to get a new watch that was recently given to me adjusted and come home wearing it.

My experience doing this involved a store that that has a strong emphasis on customer lifetime value and showed me that through good customer service. This is a real life business school lesson. Let me explain...

Nordstrom and the Watch Adjustment

Nordstrom's customer service is the stuff of legends. Everyone has heard the story of the elderly woman who successfully returned a car tire there or of the scores of people who have returned shoes after years of wear. Although those things sound extraordinary, what impresses me is the small stuff. Today was an example.

I walked up to the men's watch counter with a brand new Seiko watch and asked if they could fit the watch. The young lady behind the counter very politely said that she would and measured my wrist. She then took the watch and the box and told me she could have it done in 5 or 10 minutes. I browsed the men's department while I waited and returned to find the watch fitting perfectly. I asked the young lady how much I owed and she said not to worry about it.

Wow! What is free in this world anymore? I walked away very impressed and in Nordstrom's debt. As a result, I will be much more likely to make a purchase there in the future and I will be telling everyone I know how great Nordstrom is because they helped me out with my new watch. Maybe someone I know hear's this and goes to Nordstrom to purchase their next watch. Maybe someone who had a bad experience at a lesser department store decides to give Nordstrom a shot because they just want to go to a place with good customer service. Remember, the watch was not purchased at Nordstrom. To them, it doesn't matter. They had an opportunity to make an impression on a customer and they know a positive impression is worth more than a $10 service fee. Kudos Nordstrom, and thanks for the real life business school lesson.

On Break from Business School... Mac vs. PC ads

I was surfing the series of tubes today and decided I would check out apple.com. To fill in those of you who haven't been following the OS wars... Apple is due to release Snow Leopard in the next week and windows is planning the Windows 7 release in October (although the RC version has been available for months). Anyway, it was a web page talking about snow leopard that got me to think about Apple and head to their site.

Once I got there, I started poking around and ended up watching some Mac vs. PC ads. Having just completed a marketing class a few months ago I have a new appreciation for the genius (pardon the pun) of these ads.

First, Apple does an amazing job of constructing the two characters that are featured in their commercials to speak to their audience...

The PC guy (left above) is a slightly out of date guy that is trying really hard to be cool. He is unsure of himself and often over compensates and exaggerates. The Mac character (right above) on the other hand is laid back and cool.

Second, the commercials usually center around a particular flaw that Apple is trying to point out to potential switchers. They do this beautifully. Items like security, dependability, and ease of use have been highlighted. These have all been good points of difference for Apple to discuss, but in their latest ad they hit the motherload when they have a consumer ask the PC guy what kind of PC she should get if she "just wants it to work". This is obviously the voice of the customer and the PC responds that all PCs have issues like viruses. Her response... "I guess I will get a Mac". Great!!!

This series of commercials has largely gone uncontested by Microsoft (the obvious target of the ads) and they seem to be working as Apple's market share has been increasing for the last few years.

If you've got some spare time and want to catch a real life business school marketing lesson, check out the ads in my link above.

Happy watching...

Here We Go! Riding on the coat tails of my future MBA Degree

In 9 hours and 20 minutes I will walk through the doors of my new employer. When I clear those doors I will put to rest the last 3 years of labor management and become a business analyst for a technology company. I won't wear a safety vest, hard hat, or ear plugs. I won't hear 15 explitives before 6 AM. I won't even be awake for 6 AM. I will have to watch my posture, be sure to take walking breaks every few hours, and get a chance to talk to some folks around a water cooler. I will get to try new lunch places. I am moving from an industrial work-place to a downtown office and getting a raise in the process.This kind of leap is only possible for someone pursuing their MBA degree.

As I prepare to go to work tomorrow (in jeans), I am taking the first step as a different kind of professional. I am slowly becoming the person I envisoined I would be before I entered business school. I have a stronger acumen, wider network of contacts, more confidence, and mounds of student loan debt. I still have a lifetime of learning ahead of me, but I am beginning to get some use out of a few new tools that I have picked up over the last year.

It feels good to be approaching a major change, but it is also nerve racking. A lot of questions are swirling. Can I do this job? Will I learn the new industry fast enough? Can I do solid work wearing jeans? Will my alarm wake me up tomorrow?

This is an opportunity that should have required me to quit my job. Luckily, I was forced into making the transition otherwise I may still be wearing high visibility yellow. Only by God's grace will I be wearing non-reflective clothing tomorrow.

I think I will wear Blue, actually.

I will post again after the day is over, so stay tuned. Hopefully me and my half finished MBA degree will thrive tomorrow.

Here's to leaping and bounding!

An MBA Degree the new BA?

Over the past several decades in America, a University degree has gone from something an elite few could achieve to a product for the masses. We've gone from certain cities being centers of education to the ability to obtain a four year degree within 30 miles of any citizen in this country. In fact, with online education crossing the viability threshold, most people are within thirty steps of any level of education they desire.

And this is great news. Education has been linked to decreased crime, increased enjoyment of life, better lifetime earning, and more. The education of our nation has led to the GDP increasing and certainly bolstered our rise as a world power over the last 100 years. However, it has also done something else... flooded the market with qualified people. The days of a high school graduate having a snowball's chance in this labor market are all but gone and in the past ten years something similar is beginning to happen to the BA.

An article I recently read asserted that the MBA Degree is the new BA. I'm not sure this is entirely true, but I think it is fair to say that an MBA is the BA of the 60's or 70's. When someone earns an MBA, they build a strong network of classmates, get a door into companies near them, and join a group of alumni that are willing to help each other - all benefits of the early BA.

The one major difference between today's MBA and a BA of the present or past is rigor. Undergrad Business degrees are 2 years of general ed and 1-1.5 years of business courses, and the ability to augment the final two years with electives. In some cases a "business major" means someone took 8 "business classes". The MBA degree is different. You take 23 courses in business with the option of 2-4 outside electives. In addition, the program assumes that you have a clear understanding of the basics (accounting, stats, economics, etc.), so the depth is much greater.

And the depth is required now. Labor markets are flooded with people who have a cursory knowledge of business, but employers really want people who can innovate and create value at their companies. Is an MBA required to do this? No way, but its sure helps ease a hiring manager's mind when their new hire spent the time and money to get an MBA. It tells them they are serious about their careers, they are well connected, and they survived a rigorous academic program. You can't blame people for being risk averse.

So is it the new BA? Well, what do you think?

Looking back at the GMAT One Year After Getting Into Business School

I was just reading a article about the GMAT and Business School...

I distinctly remember someone at one of the information sessions I went to for my school asking how the program viewed the GMAT. The person leading the talk (her name was Sunny) had a response I didn't expect. What I did expect was for her to say that the test was somewhat important, but things like GPA and work experience were much more important, or that the GMAT isn't that great pf indicator of how well you will do in business school. However, what she actually said is that there is a very high correlation between an individual's GMAT score and their academic success in Business School. She went even further to say that it was the number one criteria out of nine used for admittance.

So, after one year, what do I think of all that? I think its mostly right, but probably deserves a few corrections. First of all, yes if you do well on the GMAT you probably think the right way to solve the types of problems thrown at you in B-School, but it by no means indicates that it will be easy. Second, academic success does not equal actual success in an MBA program. Cliche as it is, it is all about making the right connections and networking not only within the program, but with the community at large. Last, I know several people who had very mediocre GMAT scores that got into my school. However, they are all people that had strengths in other parts of their applications and they are some of the smartest people I've met in the program.

Is the GMAT score everything? Absolutely not, but it is important and it can make your admissions experience a whole lot better when you know you've got a 700+ GMAT score on your application. So, if your interested in Business at a graduate level... study up. Most of getting a good GMAT score is just plain practice. The Official Guide is a great place to start. Once you get it, do lots and lots of practice questions. You will thank yourself when you walk out of the test center with 20 minutes to spare and a shiny piece of paper with a big number on it.

Then, you can go back to being a human being again :)

Business School Gears Up: Finals Have Begun

I had my last Managerial Accounting session last night. The Professor did a very good job wrapping up the course through a series of summary slides.

Here are the basics of what we studied:

3000' view: Management Control through accounting systems and financial norms

1. Management Control Systems

2. Performance Evaluation for Decentralized Operations

3. Compensation

4. Governance

Now, having spent about 20 evenings studying the above material I am sitting down to take the course final. Today, I read through the exam once and I will hopefully finish the first question of four this evening. The strange thing is that this is an Accounting class, but almost half of the final exam is "how you feel".

Maybe it's not so strange though, because when it comes down to it numbers can be managed and manipulated, it really is about the feelings you have. This is one of the most important things I have learned in business school. Stock analysts, managers, and shareholders... we are all at the mercy of management's discretion, or lack there of...

So, here I go... head first into the end of another quarter. I finish Accounting this week and my other class next week. I've got June 02 in my sights and with it the end of my first year of business school. As my British cousin says... steady on.

Lesons from Business School: The Balanced Scorecard

It's been a while since I have posted an entry... please forgive the gap. I have been trying desperately to get over a horrible cough and have otherwise been swamped by personal and school activities. Yesterday, things began to slow down a bit and I am starting to feel better, so I think it is a good time to write now.

I actually wanted to tell you about the final exam in my managerial accounting class. The exam is two parts. One part, in true business school fashion, is a team case and the other part is individual. This week my team is completing the team case portion. Essentially, it is a company that is growing aggressively and is starting to feel there size in addition to dealing with the growing pains of a recent acquisition. The assignment is to identify the root cause of the problems facing this firm, generate some recommendations, explore the pitfalls of those recommendations, and offer a method for mitigating the pitfalls. Then, after the analysis is complete, the second part is to create a balanced scorecard.

So what is a balanced scorecard? Well, if you follow the link above you will see a picture for the bones of one. Most companies translate this info into a single table, but its the same idea. Essentially you are balancing financial goals (ROI, revenue targets, profit targets, etc.) with operational goals (defect rate, capacity, customer satisfaction, etc.). The process dictates that you come up with objectives, and identify how you will measure your success, what your target is, and what you ultimately want it those objectives to accomplish. This s of course done after you have identified problems and set goals for the company (i.e. strategy).

The bsc is a document than guides the organization at all levels of leadership. Ideally, an individuals performance is directly evaluated based on some part of the scorecard.

My team begins meeting on this tomorrow, and then on to the Accounting individual final and Marketing final. 20 days left until my first year of business school is complete, but who's counting...

Business School Doesn't Always Help: Schnuckerman Snickers

For the last 11 days my wife has been out of town on business. It has been a long 11 days that culminated with me eating alone at a restaurant yesterday. This is slightly less sad than it sounds because its one of my favorite places to eat...

In any case, I made my order and then picked up a copy of a local weekly newspaper to see what was happening in the area. After flipping through a few pages of art gallery exhibits, concerts, and organic food festivals, I saw a very peculiar ad for a famous candy bar company. The ad was a picture of a snickers bar, but instead of the bar saying SNICKERS, it said SNACKSQUATCH. This is part of the the SNACKLISH campaign that they are pushing on there completely off the wall website.

Before I tell you what I think of this campaign, take a look at the picture...


Isn't this the dumbest thing you have ever seen? If its not, you really need to start a blog posting really dumb stuff you've seen.

I mean really, didn't anyone in that company go to Business School. Did they discuss the idea of a target market. Who is this thing aimed at? The best I could come up with is that they are focusing this advertising on annoying junior high kids. I'm not really a candy bar guy, but this makes me want to go out and buy a Hershey bar just to speed the dissolution of a product that has obviously lost its positioning. Do you remember the old slogan? It was, "Snickers Satisfies". This sounds tempting. We all crave sugar and chocolate and Snickers satisfies that craving, but "Snacksquatch" and "Sncklish"?. It just goes to show you that all the Business School or other school in the world won't always stop the mighty power of a really dumb idea.

The Business Education of Rick Wagoner

I haven’t decided if it is political pandering or authentic toughness, but either way I’m pretty happy about the ouster of the CEO at GM (Rick Wagoner). I don’t have anything against the guy personally, but when you are the one at the helm of a company when it goes belly up, you should be fired. That's what a business education is for...

CEOs get paid to lead a company through financial storms like the one we are in. They are paid to make sure there are reserves, diversification, and multiple back up plans. So when a giant like GM is hemorrhaging so much money that they have to borrow by the billions from the American taxpayer – you have failed. It’s a tough job, the pay is good, but the stakes are high.

Thanks for playing.

I guess the part that I am so happy about here is that finally someone who should be accountable is experiencing some consequences. It’s a bit ironic to me that when companies struggle, sometimes the people in charge are the only ones who have any sort of job security. This one is a point for the good guys.

Anyway, it will be interesting to see who is next, or if anyone will be next. Maybe this was just Obama’s way of “killing a hostage”. Maybe the other CEOs will begin to take their jobs more seriously. Maybe the union will realize that they are pricing themselves out of a market. Maybe we’ll all just grow up a little bit and realize this fake world that the baby boomers have built is coming crashing down around us and that Americans need to actually get back to a strong work ethic and a focus on real innovation if we want to retain our place in the world. I hope so… but for now, I am happy to see one guy get his business education the hard way.

Round 3: Returning to Business School

I woke up this morning and took a walk around the neighborhood I grew up in. As I was walking, I ran into a man down the street I used to do odd jobs for when I was a teenager. We talked briefly and then I made my way back up to my parent’s house and got my bags together. Off to the airport…

Now, I’m sitting on a plane somewhere over California and I just finished reading the first chapter for my upcoming marketing class. The vacation is over and its time to get back to work, to school, and to the gym. Vacations are never long enough – this one was 9 days.

In round three of business school I will be taking Managerial Accounting and Marketing Management. The Managerial Accounting course is being taught by a new professor who recently completed a PHd program at HBS (Harvard Business School). After last quarter’s stats class, my expectations aren’t too high, but I figure a guy from HBS has got to be good.

Our assignments due the first day of class are fairly light. There’s just a little bit of reading/skimming and a small assignment on profit margins. No big thing, but I know 1 week from now everything is going to be nuts again – hopefully not as nuts as last quarter though.

…my plane is making a short stop and then I will be on a direct flight to my final destination. I’m hoping to get a bit more reading done and then hit the gym and finish my opening assignment when I get home.

So, here we go again. Back to Business School.

Business School is on Hold: Vacation at Last

A voice just came over the loud speaker of the plane saying, “A second round of drink service will be starting shortly”. Those are the words I have been waiting an entire quarter of school to hear. Well, not really, but it means that I am finally on vacation!
This last quarter was a major time of growth for me. I decided to stop whining about my job, I tested the limits of my energy, and I successfully completed my first Business School Finance class. Let me explain.

Several months ago I began having a very hard time at work. Instead of pushing through this slump with a positive attitude and a general gratitude for employment during a very difficult economy, I sulked and became poisonous to my colleagues. It was common for me to rant and rave about how stupid my company was and how dumb our jobs were on a daily basis. One day in January while I was sitting in class it occurred to me. I thought, “If I am going to be a leader in Business I have to be able to make an impact at work under any circumstances. If I want to command a large salary when I leave, I need to gain valuable experience now and show some maturity”.

So I did. I began taking an interest in work again and even got to participate in a six-sigma evaluation of one of our departments. I have now set myself up for a possible promotion in the coming year if I survive the layoffs. I have also caught the attention of my colleagues and manager with the change in my attitude. I feel so much better…

While I was going through this change at work, I put in some extra hours. At the same time I was busy putting in multiple hour study sessions in Finance and gearing up for a business plan competition. The demands on my time and my brain taxed me to the core. The Finance class forced me to think harder than I probably ever have before. I felt like I was drowning in correlation, present value, and risk formulas. I was only getting about 5 hours a sleep a night from Tuesday to Friday each week and I was booked from 6AM to 11PM almost every day. If it weren’t for this vacation in the future, I think my wife may have left me.

But its over… and I emerged wiser and very tired. My plane lands in 54 minutes. When I walk off, I will have ten days where my biggest concern will be which restaurant to go out to for dinner. This is a well earned and much needed break. I think I might even read something… for fun.

A Real Life Business Education: Flexible Labor Markets

Since I started B-School last year I have had a chance to step out of my career and even my company and industry to see economies and governments from the “3000’ view”. When you are looking at things from such a high altitude, you throw around macro-economic terms without thinking too much about what they mean at a, say, 6-foot level. This creates a strange dynamic between your work life, where you operate at street level, and your school life, which is mainly conducted from the inside of a space station. The irony of this dichotomy recently hit me when I was reading an article in the Economist called, “ the jobs crisis”.

The article was mainly about how different economies in the world were reacting to the global recession. It highlighted the fact that the United States has the highest unemployment rate of all the industrialized countries because of its “flexible labor markets”.

So what does that term really mean? Well, it means that it is easier for a company to fire (and I suppose one day hire) in the United States when compared to other developed nations. More plainly, the cost of lay-offs to the employer is lower in the US. From an employer’s perspective this is good. When the demand for their products or services goes through the floor, they can shed the cost of superfluous employees quickly.

Ironically, my employer has recently been taking advantage of their “flexible labor”. On Friday we learned that 30 of our colleagues at facilities on the East Coast were laid off. All of them are white-collar workers. It seems likely that I may be among the next group to prove the flexible nature of my company’s staff. I don’t recall signing up for this real-life business education.
It could be worse though. At least I have school and access to lots of Government loans. Who knows, maybe I’ll survive the “adjustment”. And, if I don’t, I will be glad for the flexibility of this country’s labor markets when I find the next gig.

Business School Didn't Turn My Ears Red

It's all over... no more assignments, no more presentations, no more group meetings, no more exams, no more evaluations, no more school... for 14 whole days.

Yes, the second quarter is over and I have two full weeks to recover. On Saturday my wife and I are headed out for a much deserved vacation and some quality time - something we haven't had in months!

But let me tell you about the last hurdle in this leg of the journey... the Finance final exam.

If you have been reading this blog, you know that most of my exams leave me with red ears and a headache. This has especially been the case in Finance and Economics. This time was different. I spent 4 hours studying practice exams two nights ago and went into this exam very well prepared.

The exam was proctored by the professors assistant because he was doing a program for a television station. The room was in our Executive center, so I got to take the test while sitting in a leather chair surrounded by mahogany tables. Definitely a highlight of business school so far...

I began the exam by spending 10 minutes on part A of the first question (there were 7 questions). However, at the end of the day I finished the exam with thirty minutes to spare and my ears were not red. I walked out of the exam room and headed straight to an MBA happy hour.

I stayed under my 2 drink maximum, but still had a fantastic time. We must have had about 50 students there drinking green beer and celebrating the end of a very rough quarter. We hung out for about two hours and then all began to go our separate ways.

Well, on with my well deserved vacation from business school. And I didn't even have to start it with red ears.

It's Go Time

In the past 2 weeks I have taken a Stats Final, completed multiple assignments for all of my classes, written a 7 page term paper for Open Innovation, and completed a 6 page Executive Summary for the Environmental competition that I am in...

In 48 hours I will bring the 2nd quarter of Business school to a close with a final exam in Finance 502. I began the grueling march towards Tuesday yesterday with a 3 hour study session dedicated to past exams. Again, today I went to school for a 2 hour review session (it's Sunday). I will hit the books one last time tomorrow night with some study partners for a final round, and then its go time.

As I wrote before, I have really pushed my limits this quarter with the addition of a third class. That addition brought my credit total to 11, which is just shy of full time. All this while working extra hours. It is safe to say that I found my limits and left them in the dust... just ask my wife.

I cannot wait until the end of this week and for Spring Break to start. I have decided to take the week off of work as well to take in the full benefit of the time. My wife and I are headed to Santa Barbara for a few days for vacation and then on to visit some family in Ventura County, CA.



...but back to the work at hand. I will write again after the exam (and the happy hour).

Limits

There is something special about those of us who decide to go back to school to pursue a graduate degree. There is something especially special when we have spouses, children, and work when we decide to do it. What is it that's so special?

We think that we are superhuman. We think that we can do anything in any finite amount of time. The truth is that sooner or later we are all destined to find our limits. This past week I found mine...

This quarter I am taking three classes (Statistics, Finance, and Open Innovation). As if the extra class weren't enough, I tacked the responsibility of leading a team in a competition onto my responsibility clipboard. The days I have class begin at 6:00AM when I wake up for work and end at 11:30PM when I get home from school. The days I don't have class are full from beginning to end with e-mails, team meetings, and homework. I've even found time to work out 4-6 days a week, lose 12 pounds, and start a low carb diet. I almost got away with it too.

One week ago my wife was skiing in Canada and she crashed pretty hard. The X-rays revealed a fracture and a surprise behind the fracture... a cyst. Since last Monday we have been to three different doctor's offices four times and my wife can barely move her arm. Luckily, my Mother-in-Law has been here to help out, but she leaves tomorrow. So here I am, not a moment to spare, and now I am also in charge of the house. But wait, there's more. I got a call today from my boss asking me to work an extra day next week for some sort of process excellence thing we are going through at work. So now I have one less day on my weekend right before my first final, a milestone in the competition, and two major assignments are due in the other classes. This is my limit.

What I should really be saying is, "that was my limit". The problem with thinking you can do it all is that inevitably... you can't. This lifestyle doesn't leave an inch for any surprises and you can always count on something happening during any 12 week period.

So, here I go... survival mode switched on. Bracing for impact!

Business School: The O.M. Scott and Sons Case

Since I started Business School I have discovered the MBA Professors best friend... the case study.

Cases are short synopsis of business situations that have accompanying attachments like financial statements or sales records. In accounting, my group completed several cases to help teach us how to unwind accounting voodoo that companies would use.

When studying a case, the most learning occurs when the answers are discussed amongst group members with differing opinions. This is exactly what happened yesterday when my group was completing the HBS O.M. Scott and Sons case.

The basic premise of the case is that the Scott company (lawn care seed and accessories) has introduces a new method of sales to their dealers. The major change is that instead of collecting all of the money for product at the end of a season, they collect it as a dealer sells the product. This means some of the products will be paid for earlier as they sell, but if there is product left over at the end of the season it will not have to be paid for until it actually sells. This would be mid-season or the next season. 

In addition to the sales change, the case covers topics like debt covenants that tie up working capital, earnings versus free cash flow, and overall wealth. This case is a very cumulative application of everything that we have covered so far in Finance.

My group began work on this case at 9:30 in the morning and didn't finish until 3:00PM. Our main hang up was that we hadn't all looked at the case very thoroughly before getting together. As a result, we argued the points out until they made sense to each one of us. This is a huge time suck, but it also contributed to all of our learning, and I think this is the point.

If a person was seriously considering Business School, this case is a good insight into the level of work that is done there.

I guess the bad part is when we "Finished" we really weren't done, so now we will be working independently until our next meeting where we will summarize the recommendation. Our final recommendation needs to be 2 pages with about 2 pages of graphs. We also have a midterm on Thursday.

Yes, it does seem a bit cruel and unusual.

Well, back to the books for me!

Lessons from Business School: Present Value

I mentioned in a previous post that one of the three classes I am taking this quarter is Corporate Finance. This has been a class that has demystified a lot of terminology. We have learned about things like Annuities, bonds, and perpituities. We have also discussed stock valuation, like what a stock is really worth, what people mean when they say "yield", and most importantly present value.

The Professor teaching the course, who I also had for Microeconomics, said that if he had his own business school he would make present value the central theme of the entire program. On a more recent occasion, he also said that the business school graduates he has seen making the big money are the ones that really understand present value.

So what is it? Well, it is the present value of all future cash flows in today's dollars. The discount factor used in present value isn't inflation though, as one might think. The future dollars are discounted using the opportunity cost of capital. Here is an example. Let's say you have $100 and someone offers you $110 next year for your $100 today. It is helpful to know what that is worth today. Let's assume you have a savings account that pays 10% interest (fat chance, but let's go with it for the example). If you put the money in the bank it would pay you $10.00 interest. Therefore, $110 next year is worth $100 this year to you. This may be different than an inflation rate of 2-%-3% or a deflationary rate which we are likely to see in the next year.

Anyway... I know... major boring stuff, but the concept is looking at what future opportunities are worth today. This is hugely applicable when it comes to spending a company's or your own money on something that will pay you back in a certain way. Do I invest in this business, or just throw my money in the S&P 500, which "always" yields about 7%? Should my company start making a new product that takes about a year to cycle back a 5% return or do we have other opportunities that will do better for us.

Sounds simple, right? All you do is look at the future cash-flows and discount them back. Anybody with a calculator or MS Excel could do that. True, but this is where it gets tough. Projecting cash flows isn't easy. Imagine you wantto buy a vending machine route. The seller tells you that they net $5000/month. You determine the purchase price based on the $5000, but what happens if one of the machines busts, or the factory where it sits decides they don't want it there any more. These are tough things to predict and can only be factored in using a risk adjusted discount rate. Here the whole thing gets even goofier. I'll spare you the rest.

So is PV important? Should I be trying to calculate the PV of business school in terms of the future increase in salary and fulfillment I will receive? Maybe, but not yet. I still have 6 weeks left in the class :)