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 :)

Glad I'm Getting My MBA Degree: Bloody Monday

I was reading an article on CNN earlier today about the latest round of US job cuts. The article details all of the jobs that were lost yesterday. The grand total is 71,400. What an astounding number! This got me thinking... these are real people losing there jobs. Most of these people are supporting families or spouses and they won't all find jobs immediately, or any time soon. And 71000, that is the size of the city I grew up in - and this is just one day we're talking about here.

With the economic climate the way it is, anyone could be next... I could be next. So what would I do if I lost my job? Well, I would pray for a severance and start looking. I have a little bit of savings, so I would be OK for a few months, but after that it would be all about deciding which order to throw the bills in the recycling bin. I just don't know how we would survive on one income (my wife's). Unfortunately, I think my situation may be better than most. At least we have two incomes and some savings.

I guess the silver lining in this stormy time is that I am in school. I know that my fist inclination after losing a job would be to improve my marketability as a candidate. Since I am in school now, I am already doing that as I work. If I am laid off, well, at least I got a small head start.

Besides, it is a fantastic time to be pursuing an MBA degree. As I was studying financial accounting, I got to see the bottom fall out of the market along with all the real life business cases that resulted. In economics we discussed supply and demand as the demand for just about everything began to shift inward at record pace. In statistics we have been looking at standard deviations while the market is living in an area that was 5-6 standard deviations from the mean. The applications are countless and it is really contributing to the learning.

Not to be a profiteer of pain and suffering, but I am getting an opportunity to live through things most students getting their MBA degree only read about in a text book.

Back to the economy... yes, the outlook is bleak, but if you read the article, a little hope is offered.

An economist is quoted at the end as saying,

These recessions are like geometry... ...it looks like we'll have a V-shaped cycle, in that we're going into this with very sharp losses. This intense-phase recession will probably recover fairly quickly, with the job market coming out it at the same angle it came in."

There you have it... out the same way it came in.


Happiness is a state of mind :)

Business School Continues: Midterms on the Horizon

I am coming into the 4th week of my second quarter in Business School which means that midterms are just around the corner. I actually have a stats midterm on Tuesday, but my Finance midterm is still about ten days away.

I am still getting used to the speed of the quarter system. When I did my undergraduate degree I was on a semester system. Midterms were almost two months after the term started. It seemed like you had ages to prepare and the information had become second nature to you by then. With quarters you are still learning how to spell the professors name when midterms begin. I joked with a couple of the guys in my group about how the midterm in stats was  five weeks away. This was a conversation we had the day before the quarter began!

So here I am two days away from the stats midterm and I haven't began studying. I have to do a complete review of everything we have covered. This includes the basics of probability and information summaries such as mean, median, and mode. But, it also includes standard deviation of populations and samples, standard error, Z-scores, T-scores, independent variables, dependent variables, mutual excluvisity, probability trees, binomial shortcuts, etc.

Am I ready? Absolutely not. But, I have the day off tomorrow and the exam is open note, open book, and we can even use Excel. This seems kind of silly since excel has formulas that can solve any stats problem we get, but I guess we will be able to use Excel in the real world too.

After the Stats exam, I will switch almost immediately to Finance. There I will focus on Fisher Diagrams, Present Value, Annuities, Bonds, Stock Valuation, and other exciting Business School topics. But I can't start looking at that stuff until this weekend. I wouldn't want to get ahead too much.

For either exam I will have a crib sheet at a minimum so hopefully they won't be as stressful as last quarter's. Here I go... deep breath has been taken. I'll see you on the flip side.

Business School on Pause: Why the fact that the Obama inaguration is no big deal is a huge deal

I wanted to put all of the talk about business school, the economy, and professors on hold for this entry to write about our 44th president who is going to take office today.

It seems like the primary election took half a lifetime, mainly because the candidates starting campaigning two years before the nominees where officially named. And the general election seemed to linger on forever too... it was like running an extra 10 minutes at the gym after completing a normal workout. It just seemed like overkill and every one got bored and boring.

Now, the boredom is over. We have a historical event taking place today. We are about to install the first African American president in our nation's history. This is a huge deal, right? Well, I'm not so sure.

Here is a 27 year old's perspective. For my entire life I have heard about racism, mostly read about it, but rarely ever seen it in action. I've heard rappers on TV complaining and men convicted of crimes crying racism, but I haven't seen it in my every day life. I guess I don't see the inequality. As a west coast kid, I was in highschool before I even realized that skin color and ethnic background really mattered.

It didn't surprise me to see African American's, Asians, Indians Mexicans, or people of any other background succeeding in sports, acedemics, student government, or aything else. We are all people and I've always felt like people with unique backgrounds have an advantage. I guess I should tell you that my father is East Indian and my mother is white. So I too am a "minority". It just never mattered, didn't count, didn't figure in to the equation.

...and I'm not unique in this view. I have other friends with mixed parents, white parents, Pakistani parents, Indian parents, Japanese parents, and Chinese parents who feel the same way. We are all thinking to ourselves with this Obama thing, "what's the big deal? Obama is just another guy. Anyone can be president, he is the next one, so what?"

Well, I began to understand how important this is last night when I heard one of the Tuskegee airmen on the radio. For those of you who don't know, these were African American men who flew in the airforce during World War II. They were trained at a segregated base in Tuskegee, AL. They fought and died for their country, but were often disrespected and even spit on by Americans who didn't want people of their color in the military.

Anyway, the Tuskegee airman on the radio was talking about what a huge day this was for African Americans, and for him especially. He spoke about Obama as if he represented the vindication he had been looking for since the late 40s. He was proof that an African American can do anything.

That's when it hit me. The fact that I am not surprised by Obama's success is the very reason why we should be celebrating. A generation has passed since WWII and another one will soon be passing since the racial struggle of the 60s, and we are finally moving on as a nation. It is becoming the norm for skin color and ethnic background to be a non-issue in an individual's success. People really are being judged by the content of their character. How amazing!

So, I guess I will be watching this historic event on Television today because it is a really big day... not just for African Americans, but for everyone in this nation. Although, there are still more wounds to heal - this is big!

Business School Continues: Incentivising Failure

This last week I made the decision to add one more class to my current quarter. The name of the course is Corporate Entrepreneurship and it is centered around the idea that established corporations can both participate in and support entrepreneurship. I thought it would be nice to add a touchy feely elective like this, and it will help me finish Business School at least one quarter early.

I missed the first class, but the second one we spent a good deal of the time talking about monetary incentives in the work place. The basic stance that the Prof took was that incentivising your employees with money doesn't work. She went further to say that it doesn't foster innovation. Her point was that employees perform and innovate best when the reward for doing so is intrinsic, meaning they like to do it.

In addition to numerous studies, she gave Wegman's market and GE as examples. Wegman's is a grocery store on the East Coast that is full of employees that are nuts about food. The cheese people are cheese connoisseurs, the meat guys are fully versed on the details of their grass-fed, organic, and non-organic meats, and the wine people train in Italy. They find people that love food to work there and reward them with training, status (Wegmans is an enviable place to work), and a sense of ownership in their work.

The example she gave from GE is one of her engineering friends who had an idea for an MRI machine that could be used during surgery to give real-time scans to a doctor. Her friend brought this to management and was granted two years with a full salary to research the idea. She had all of the companies resources and full rights to use the GE name to get help. At the end of the day the idea was a success and her friend can't stop talking about it.

The common thread here is that no performance bonus is given at Wegmans and it did not occur in the case of the GE example either. The rewards are intrinsic for everyone involved. So her question to the class was, "Are companies doing any good by adhering to pay for performance plans?".

When she asked this, the discussion began with quite a fervor. The sales guys in the class began debating. One said that he doesn't know how you would get people to sell things without incentives, while the other said that sales people become so blinded by incentives that they look to them to determine what to sell. Another woman who works as an engineer said that pay for performance at her company doesn't exist and that it would stifle creativity if it did.

I sat back and listened to all of the discussion during the class and had this thought. Money is a cheap way to reward and encourage a work force that a management team is too lazy to get to know. Rather than cramming different personalities into the same jobs and pushing them forward using money as a carrot, why not hire the right people in the first place and empower them to use their strengths for the good of the company. Give them the freedom that GE is willing to give and let them work for you in there own way. Employees will flock to a place where they aren't shoved into a system and made to feel like a cog.

What a different way to view things. Think about it. Yes, a good salary is essential, but are you going to stay at a place that give lots of bonuses, or the one that lets you do what you love. For the long term, I think it is the latter.

Anyway, the class should be interesting. I will keep you up to speed on some of the other topics and adventures next week in Business School.

Business School Returns: Round Two of the MBA Degree

It has been four long weeks since the agony of the Micro Econ final. I enjoyed time off to spend with my wife, a vacation home for Christmas, and lots of sleep. But, this Monday I returned to the grind.

The second quarter of the MBA degree program has two new classes. Goodbye Financial accounting an Economics... hello Quantitative Methods (Stats) and Corporate Finance. I started off on Tuesday with the Stats class. The professor is new and a former employee of one of the many banks that just failed. Overall, the tools I will gain from the class (regression, distributions, CHI Squared) seem very good, but the professor is as dry as can be. In his defense, I doubt he planned on teaching as of just a few months ago, but it is obvious that hasn't put a lot of thought into the course. The Powerpoint he is using is the one created by the author of the book and he reads directly from it during class. Some of us think he is reading it for the first time during class.

The boringness and unpreparedness of this guy really concerns me. I wasn't in love with my Econ Prof, but at least he had passion about Econ and a mastery of it. I didn't always like his style, but he knew his stuff. This guy knows stats... I think, but he isn't the best at communicating the concepts, and so far is not very good about giving real life examples that relate to the material. I will keep you updated on how this turns out, but the "odds" aren't very good.

Corporate Finance is taught by the same Prof that taught the Econ class I took. I am hoping to capitalize on my previous knowledge of him to get the most out of the course. To be honest, I think this class will be a little bit less cryptic than Econ was. We started out with Net Present Value (NPV) and outside of some weird notations it is all making sense. Although, that's what I would have said last quarter at this time. We will see...

So, one week in and only 10 to go until Spring Break. Stay tuned for the latest progress on my MBA degree.

Business School, the Spiraling Economy, and Plan B

Happy New Year!

I have been enjoying a long and relaxing winter break, besides the whole job thing that is. But the beginning of this Business School pause started off slightly more stressful than it is ending. The added tension was brought on by an announcement at work.

Our local Senior Manager called a meeting and announced that we had lost about two thirds of the business from our largest customer. He said that we were trying to get some more business, but that there would definitely be some changes coming. On December 31st, the first person was laid off.

This is just the beginning, we won't officially lose the business until the spring. The general consensus is that there are going to be more broad lay offs at a local level. Contemplating this, I began to think about what I would do if I was laid off. Of course, the first thing that I would do is look for another job. I have some side things going that, when combined with a modest severance, could keep my wife and I going for about three months. But I have no real savings outside of my 401k, and that would only make my house payment or about a year. That doesn't include all of the other expenses that my income pays for.

The bottom line is that if I couldn't find a job quickly, we would have to short sell or foreclose on our house and take a major hit to our lifestyle. In the worst circumstances, we would need to move back home and live with one of our parents until we could recover. It is the potential for that move that prompted me to cover the worst case scenario.

I have applied for a Full-Time MBA program back home. I am fortunate that both my parents and my in-laws live within 60 miles of a top 25 Business School. However, the idea of leaving the program that I fought so hard to get into is not pleasant. I don't know if any of the classes would transfer, and I would have to abandon my group and a school I really enjoy. This is definitely a path of last resort.

Completing the application has been much easier this time around since I have the practice, but the whole process has felt very strange. I really didn't think I would ever have to do this again. But two recommenders, 4 essays, and a GMAT score report later I am almost ready to send it in. 

I want to get in for the sake of my self confidence, but I hope I never attend.

Business School Lessons Part II: Oilily, & the 5-Hour JC Penny Coupon

…So the result of months of discounts led to what I experienced at a European store called Oilily in early December. Those of you that are familiar with the store know that it is an uber-high end store of the $100 T-shirt variety.
Here’s how it went…

I walked in the store and was greeted by a sales girl who instructed me to draw from a hat. When I asked why, she said that I was “drawing my discount”. I reached in and pulled out a small piece of paper with “40%” written on it. She grabbed it out of my hand and said, “Oh, you can do better than that”. I reached in again and found a 55% paper. She seemed satisfied by this. The deal they had running was that anything not already on sale would be discounted by the amount you drew. So, my discount was a minimum of 55%. The thing was that most of the store was 60% to 70% anyway.

This was shocking! Demand had dropped off so much in this mall and particularly for this specific retailer that they were liquidating there merchandise at a two-thirds discount. Amazing! Business School showed me supply and demand in depth, but that day Oilily cemented it in my mind.

A few weeks after my Business School lesson from Oilily, I took my $500 flight home (strange how airlines don’t seem to be adjusting to the recession- and they have been going bankrupt lately… hmmmm.) I spent a week with my family and then headed to Macy’s.
I pulled up to the mall at around lunchtime and stumbled in to a mad house of people. It seemed the store was having a one-day sale. On top of the one-day sale, there had been a coupon mailed out for an additional 20% off of the first $50 purchased in the store before 1PM. Here again, Business School taught me a concept, but JC Penny’s brought it home…

Price Discrimination.

JCP was so desperate to capture more sales that they catered to a group of people they normally wouldn’t sell to… the people who clip coupons and are willing to wake up in the morning the day after Christmas for a deal. And it worked. At least they sold lots of stuff – I do question how much money they were making on the items they sold to the people with absolutely no opportunity cost of time. I guess we’ll fins out next quarter.

Between Christmas in October, Oilily, and JC Penny, this has been a retail season to remember. It certainly rooted many of the lessons I learned in Business School into my head anyway. I hope for your sake and for mine that I stop learning lessons from the real world soon.

Business School Lessons Part I: Oilily, & the 5-Hour JC Penny Coupon

I’ve been sitting on my Southwest Airlines flight for about 20 minutes now… only 3 hours to go. So this seems like a good time to talk about the last few months and some of the ridiculous things retailers have been doing.

It all started shortly before Halloween. Yes before. Do you remember the Christmas lights, music, and store sales firing up on Oct 25th? That’s when it all began in my neck of the woods anyway. At the time, I was one month into business school and I began thinking, “Why are retailers doing this?”. It wasn’t a very hard question to answer. They were doing it because no one was shopping… it was like someone had turned the faucet off. In other words, because of the heightened level of hysteria about the economy, the demand curve for… everything shifted in. People in general were willing to purchase far less at the current prices than they had just a few months earlier.

Business school has taught me that the natural reaction here was for the retailers to lower prices and try and shift the demand curve back (2 separate events). For the first part, everything began to go on sale. And the second part is why we were listening to Jingle Bell Rock and staring at tinsel at the same time as pumpkin patches were littered with children and hay.

Like most good things, the resulting quantities sold from the fire sales didn’t last. By the time Black Friday rolled around, retailers had been offering “Christmas Sales” for over a month. So what happened when the retailers offered “normal” Black Friday discounts? Everyone said that the sales weren’t that great. What did they expect? Hawaiians aren’t impressed with Malibu.

Gearing up to Gear Up - Random Thoughts at Midnight

I have been vacationing in my hometown for the last nine days and am now getting ready for my return flight. Actually, I just printed my boarding pass for my Southwest Flight... I got boarding group A!

It was a strange thing to have no work and no school for the last nine days. Now I am returning to work, school is just around the corner, and I am still looking for a new job in one of the worst economies in the last 30 years. On top of it, I am taking a class that I have been dreading since I was accepted, Stats. Nothing to worry about, though. I can learn anything, right?

So here we go... I will be purchasing my textbooks in the next day or two, finalizing all of the projects I set out to do over the school break, and working out in a habitual way. I should tell you that working out has been my great success over this break. Every time I go home for vacation, I bring several books and plans to jump-start my physical activity. Most years I hardly read at all and go running once. This year I left the books at home and had a simple goal... run every other day. After tomorrow I will have met my goal - gotta wake up early though.

I am beginning to feel the jitter of business school again. My legs are restless, my head hurts a bit, and my heart rate is slightly elevated. I know it sounds a dramatic, but this is a marathon and I have only run the first couple of miles. I have had my drink of water and recovering breaths, now back to the race.

I look forward to sharing the next chapter of my journey with you over the coming weeks. So, please keep checking in.

Business School: The Econ Final PART II

The professor entered the room, told us how much time we had for the exam, and then wrote the end time on the board. He passed the exams out face down and then told us to start. The pages flipped in unison. I surveyed all the questions and underlined a few of the words that I thought were important. This was sort of my brain warm up.

I then began to answer the first question. After I looked at it, I realized that I didn’t know exactly which graph to use or even really how to answer the question. So I evoked plan B, which was to start with number 2. I answered the second question and then went back to the 1st. Along the way I crossed out graphs and words, changed entire sections of my answers, and sweated a lot.

Finally I made it to the special multiple-choice questions. These are multiple-choice questions where you have 4 possible answers. Of those 4, all of them, some of them, or none of them could be right. In addition, you can write an explanation or graph to go with your selection, but this can both help you or hurt you. I discovered early on with the practice testing that my first instinct was usually wrong on these. So, I pondered each one and answered them the best I could. Once the multiple choice questions were out of the way, I looked over the whole test again. With 10 minutes left, the professor interrupted the test to tell us there were a few typos. One of the typos was that a question that indicated a price control should have actually said that there were no price controls. Luckily he gave us the option of leaving our answers the way they were and just making a note on the page. I did that and then turned my test in.

By the end of the test, my ears were red, my mouth was dry, and my brain was complete mush. Although, if I am honest, my brain was less mushy than after the midterm.

I was about the tenth person to walk out of the classroom. I joined a group of students talking about the exam. One by one the class trickled out and the attitude was the same for all of us. We had no idea how we did. This is the toughest thing I’ve had to deal with in Business School so far. I felt the same way after the midterm, but this time I decided that it wasn’t going to bother me. It didn’t matter, it was over and there was nothing I could do about it.

After the entire class finished the exam, we all headed over to a local pub and several people got hammered. I limited my intake to two beers and talked with everyone I could. This was a good experience because I actually got to know two of my classmates better. That has been a goal and a focus of mine, but until this particular happy hour I hadn’t done a very good job of it.
The night ended with a walk back to my car with one of the classmates I talked to quite a bit. The campus was dark and the calm began setting in. It was finally done. My first quarter of Business School was over.

Business School: The Econ Final PART I

I just realized that in my busyness of the early part of this month I failed to describe to you a noteworthy experience… The Econ Final Exam.

First, I should back up a day. Fresh off the Accounting Final, 3 of my group members including myself gathered at a downtown office to spend 7 hours or so studying accounting. We started the meeting off the way every good Business School meeting starts… with food.
The 3 of us met at an Indian restaurant in the building. They had fantastic Naan. After a few drinks, the naan, and some curry we headed up stairs and got to work. 2.5 hours later with a full white board and a haggard look on all three of our faces, we took a detour to a local restaurant for some appetizers and drinks. The place was actually having trivia night. The winner won a discount on their final bill equal to the total number of points they earned during the competition. We just watched.

After about 40 minutes, we returned to the conference room and proceeded to mark up the white board again. By the end of the night, we made it through 2 practice exams… every question. We actually took turns graphing, explaining, and discussing the questions. We all headed home for the night with minor headaches.
The next day I was off of work so I slept in until I woke up naturally (11AM). The weight of the exam to take place that evening loomed over me from the time I rolled out of bed, but I didn’t spend any time studying that day. I figured out a long time ago that my cutoff for studying is the night before at around 3AM.

So, I enjoyed my day off and then headed to campus. I met my group members in the MBA lounge where they were studying again. I guess they don’t have the same cutoff. I participated for a few minutes and actually got an explanation on one of the graphs that I didn’t fully understand. That was good, but I was done after just a few minutes.
After a short while, we all headed up to class. As the room filled up, the chatter began to pick up in volume. Most of us were smiling nervously in our chairs awaiting an exam that we had been dreading for the entire quarter. There we sat… Business School lambs to the slaughter.

The First Grades of my MBA Degree

I know you all have been waiting so I will get right to the point. Last night I finally received my grades!

In Economics I received "better than a B" (I'll explain this in a second). In Accounting I received something between a B+ and an A- (this is due to the University using a point grading scale instead of letter grades).

The reason why I say "better than a B" in Economics is because of a late grade situation. The story is that the professor had a conference to go to and would be submitting our grades late as a result. However, many of us have a deadline to receive reimbursement from our employers, so we needed our grades sooner. As a compromise the professor gave us all the lowest grade he expected us to get, which in my case was a B. He will later change my grade to whatever I actually earned. In the meantime, I have 5K coming from my employer. No dead-weight loss on that transaction.

So, I am breathing huge sighs of relief. I know I said it before, but now I really feel like I am 1/9 of the way to an MBA degree. I am also relatively happy with my grades, which are icing on the networking/learning cake. In case you don't remember, networking and learning are are my two major priorities. I should actually say that learning how to network is my first priority, but I am improving here so I will leave it as "networking".

Well, that's it for tonight. I am headed home for Christmas, so I hope to be writing a lot over the next week or two. So, stay tuned for more market banter, interesting thoughts on random books, and flash backs to my first quarter.

Until then...

Business School Takes a Break

It's Saturday night and I just got home from my second Christmas party of the week. I've been sleeping in on my days off of work and doing, well nothing much at all.

That's right. One of the best parts about being a student is all of the vacations. Since my school is on the quarter system, I have a month off until I have to start classes again. I was exaggerating a bit when I said that I have been doing nothing. In fact, today I finally got a work out in- desperately needed from all of the sitting and eating I've done over the last 3 months. I also finally went through the mail that had been piling up. I recycled a 15 gallon bag full of papers and shredded another one. I honestly can't believe how much mail we get!

I've got other B-School vacation projects planned including cleaning the garage, selling a record player, paying lots of bills, and sleeping in every chance I get. This should be a pretty stress free couple of weeks... except one thing. Grades.

Grades will be reported next week and I am a little nervous. Although this is Business School, and learning is the important thing, I can't deny my competitive or achiever nature. I want to learn a lot and get high marks. I'll settle for decent grades and a lot of learning though, I guess.

So yes, the stock market is sinking into the abyss, 3 of the largest US companies are on the verge of collapse, the USA is becoming the USSA, and I am worried about how I did in Econ and Accounting.

I will keep you posted, because I am just certain that you are worried as well. Stay tuned!

Business School: Finishing up, Fighting Back

It is 3:00PM and I will be sitting for my last final exam in approximately 3 hours and 30 minutes. I will be finishing in approximately 5 hours and 20 minutes... not that I am counting. Not that I am so excited to have a break from classes, assignments, group meetings, conference calls, study sessions, textbooks, cases, and the chaotic pace that has defined my last few months. Nope, not excited a bit.

OK, I am very excited. Although this is sort of an odd time right now. I spent last night studying with two of the guys in my group until 1AM, and now have a few hours before the final. I am starting to feel the stress melt sway, while at the same time, increase.

So what's the big deal right? One little final left. I didn't miss a day of class and have put in several hours studying. Piece of cake, right? 

Well, not exactly. This final is in Economics. Remember, the time when the professor announced during the third week of class that the "principles" part of the class was over. That is this one. This is the class that has introduced concepts including , but not limited to, the perfect competition model, indifference curves/map, income elasticity, price elasticity, consumption price path, deriving a demand curve, isoquants and isocosts, Natural Monopoly, Cartels, the Kos theorem, the equimarginal principle, and so much more.

And each one of the above items has a graph that goes with it. Do I know these graphs well? Mostly, I guess.

So yeah Business School, you've kicked my butt a little bit this quarter with this economics stuff, but I'm fighting back. I will come tonight with a four colored pen (the clicky kind), graph paper, and a twinkle in my eye. I will do well (remember the goal is 2/3 of 2/3) and I will smile as I turn my test in, swing the door open and bring the first quarter of business school to a close. 

So look for me to be riding off in the sunset later tonight. I'll see you on the other side.

Business School Returns: The Calm is Over

Well, it is the beginning of the very end of the very beginning. Translation... it is finals week of my first quarter. The quarter has gone fairly well up until this point. I scored in the top 1/2 of the class on my Accounting Midterm and 12% beyond the average on my Econ midterm. More importantly I surpassed the 2/3 of 2/3 mark that the professor set as an expectation. Tomorrow the studying begins. (I'm off work tomorrow)

The plan is as follows:

09:00 AM Wake Up
09:45 Plan studying for the week
10:30 Economics
11:30 Lunch with my Grandma (visiting from out of town)
3:00 Accounting
4:30 Tutor
5:30 More Accounting
7:00 Group Meeting to discuss an Econ group question
10:00 Home and some decompression

After tomorrow, I have 3 more days to hit the books before the first Final (Accounting). This one is going to be a take home test again. As I discussed before, I loathe the take-home, because I end up spending 10-12 hours and losing probably 30 days from my life.

Then, next Tuesday is the quick and dirty Econ Final. One hour and fifty minutes of head pounding, room shrinking, swetty eyes torture.

And then... freedom. Vacation for an entire month... no class, no group meetings, no assignments, and no required reading. I can already see myself going for a run, staring at the wall, watching hours of television, and even tackling a home improvement project or two. I can't wait.

But for now, eyes are on the prize. The Business School experience is hitting me head on this week and I need to be ready for it. So, here goes nothing, a few class sessions and tests away from freedom - er, I mean accomplishing the first part of Business School... did I mention learning?

Almost 1/9 of the way to getting my MBA Degree

Well, I officially have one and a half weeks left until being 1/9 of the way through my MBA degree program.

Strangely enough, the idea that the final exams are the last hurtle is very comforting - if I was in my right mind, I would be panicking right now. But I'm not panicking, I am hanging out with my 5 lb. yorkie (pictured above) listening to s

ome sort of Christmas reggae music. I am procrastinating with a 

plan - a plan to study on Monday. Yep, for now I am just going to relax...

relax... yeah, relax. I'm not thinking about the practice test I could be working on for either accounting or economics. Not thinking about how I should be reviewing deferred taxes, bonds, and leases. Definitely not thinking about monopolies, price discrimination, or dead weight loss...

That stuff would be very stressful. No, I am just taking deep breaths on my soft couch and hanging out with my tiny little dog.

OK, so I'm not in complete denial. I know I have at least 20 hours of study time ahead of me, but I really do need some decompression time. I plan on going to bed early tonight so that I am rested for the coming 12 days of madness. I really will start studying on Monday. Really... come on, I'm going for my MBA degree... I am a serious student... super serious.

I will check in by Sunday with a game plan so you don't worry, but for now, it's me, the dog, and the Christmas Reggae. Goodnight.

Business School Blues: Is it really just about points and winning?

As a first year Business School Student, I am still a bit naive. I still think that most businesses were started and continue based on an individual's passion for what they do. I believe that the ethics scandals that have plagued this decade are all outliers and that most business people are honest... well, that's what I use to believe. Now those ideas are on shaky ground.

Let me explain...

This last week we covered a case in my Financial accounting class that was centered on Enron, ZZZZ Best, and other companies that had trouble with right and wrong when it comes to accounting.

Here is a 1 sentence synopsis of each:

Enron: Executive creates several shell companies to hide Enron's losses and manipulate financial statement numbers - a few people make lots of money and many people lose their life savings as Enron implodes.

ZZZZ Best: Teenage business prodigy raises millions of dollars in capital and gets his company on the NYSE - the catch is that the business is 90% fake... he makes out like a bandit for a while and all of his investors, including some friends, are duped (he eventually landed in prison)

Other heartless Companies: Similar to the above.

So, the question is... are the above examples unique? Or are successful business people that evil? I think the answer is most often the latter of the two.

The conclusion that I am beginning to come to is that the big players are just playing a giant game of chess. Money really isn't all that important in and of itself, but it is an important indicator of who is winning. You see, it's points. The world is a giant sim city and these guys are building, destroying, and tweaking the game to see how many points they can get. They'll lay off workers, manipulate income numbers, lie to the public, or worse, to win. No one is accountable because this is the game, the rules are known. People are liabilities, quality is secondary, and selling the product at any cost is the goal. 

It is sickening. These guys stand up in front of a camera and describe why a number was this way or that way, what there plans are for the future, and how well the company is doing under their leadership... lies and more lies. CEOs speak to the public to win them over so they can get more points.

This is super depressing and has me wanting to find the exit. I mean, I want to be a player in business because I have a passion for it. However, its not worth selling my soul in the process. So what's the solution? Do I bite the bullet and become a playe?. Do I forget my humanity for the sake of seeing how rich I can become? Do I step on anyone and everyone I have to in order to make it to the top? Do I lie, cheat, and steal in order to win?

I say no. I say we start a revolution! I want to be an ethical MBA. And not just because ethics are in Vogue. No, I actually give a crap. I want my work to make some sort of a difference in people's lives, and I don't need to have my own corporate jet. I want my integrity to remain my most valuable asset. So, is there room for me in the game? Can I play by my own rules with passion and purpose?

The truth is that I'm really not sure if I can do it. I don't think I'll sell out, but I  do think a moral compass may be debilitating in the business world. But here I go with my naiveness, energy, and a crazy ideas. 8.1 more quarters and I can enter the world. Watch Out!

Business Education Continues: Has Everyone Just Gone Mad?

I have recently been getting into the bailout drama with the big three auto makers and boy has there been some drama. From congress asking each one of them if they flew in a corporate jet to request the billions in bailout funds, to the CEO of GM saying that it isn't his fault the economy is in the tank, to the insane statistics surrounding the potential demise of the American auto industry.

I just have to say that this entire situation is ridiculous. Really, how did we get here? The bailout was supposed to be for financial institutions - an injection of capital in the arm of the system that supplies money to the entire economy. The idea was that if these guys could be saved, then they would save every one else. At least everyone else worth saving, i.e. they would provide capital in the form of loans to businesses that were worth the risk. But somehow, we are now considering $25 Billion + to keep the automakers alive. 

Who is next? Circuit City? Starbucks? Joes Smoke Shop? Really, where does it end? Last time I checked, bankruptcy and failure were part of the free market. If there is no chance of failure, than what is there to motivate businesses to earn a profit and be productive. Specifically, why do the automakers think that they are exempt from the rules?

The reality is that the automakers have massively debilitating contracts and extremely inefficient manufacturing facilities that vary drastically from one location to the next. So do we continue to keep building the same mouse trap? Do we really think it will work? Or do we let them all die? 

Here's what I say... this country isn't big enough for the three of them. Let one die and let the other two declare bankruptcy. After they have declared bankruptcy, and have the ability to re-negotiate all of their debt and contracts, then the government could step in. It is here that we could provide a conditional loan with debt covenants that include heavy mandates to manufacture alternative energy vehicles, and require the CEOs to step down. Obviously these guys have not given us any evidence that they understand how to run a profitable business. This solution would shrink the supply and force the American car industry into the only business model they have a chance at succeeding in - Innovation and highly skilled manufacturing. 

I know, it's not entirely a free market solution, but I'm afraid that the industry is just too squeaky for us all to ignore. They have the ears of congress, and in some cases they are large contributors that are owed a favor or two. Translation: I don't think perpetuating a "let them die strategy" will work. So the above is the best version of a compromise I can come up with. 

Oh... I think we should force the CEOs to get a new business education too. Did you know that the CEO of Ford was proud of the fact that his company has enough cash to make it until February. Is he serious? Congrats Alan Mulally, your company won't die for 4 more months. Gosh, that must be why he made 22 mil from the company last year.

What a crock!

Business School Rocks the Real World

Since I started Business School I have had a few occasions where the lectures, cases, and discussions have lit up in my brain during a real world experience. I thought I would share one of these extremely nerdy thought processes with you.

Ite has to do with one of my favorite burger joints. The cook/owner of this place used to be a chef at some fancy restaurant in the west coast city I live in. After getting Gastric Bypass surgery, he decided to leave his job as a respected chef and open up a gourmet burger shack. However, he chose to form his burger menu using fine ingredients including grass fed beef, duck, chicken, and prime rib.

Anyway, the place is sort of a hole, but they have some very fun decorations, including lunch-boxes, a velvet (really its velvet) covered communal dining table, and a hostess that rivals the soup nazi (when its busy) - she's also the chef's wife... co-owner.

Here's the one thing about this place though... the burgers are $14.00. So what economic concept did this click for me? Opportunity cost. I am willing to forgo the other options of the $14.oo for the 15 minute enjoyment of a cheeseburger. This really surprises me about myself. I didn't think I was willing to give up a movie and popcorn, 7 gallons of gas (now that prices have dropped), 2 games of laser tag, or most of a haircut for a cheeseburger. But the truth is that I am. I have a huge preference for excellent cheeseburgers

I was further impressed when I overheard the co-owner talking about a customer that drives two hours to them every weekend for just one burger. What is his opportunity cost when you include time, money, gas, insurance, wear and tear, etc. ? Either he really likes those burgers or he is a guy who has free use of a car and a ton of time on his hands with minimal alternatives.

Yes, business school has made me this nerdy.

MBA School: The Home Stretch

So, it has been about two months since I started MBA school and finally the lull. Midterms are over, finals are three weeks away, and I am in the middle of a deep breath.

...better hold that breath.

On Thursday, my accounting professor addressed the break that we are currently experiencing by releasing the practice final. How could he do that? Don't we deserve this break? 

Apparently not. 

Apparently this is the way it works. As in life, when there is free time, that time needs to be used for preparation. So, yes I am going to hit the books over this "break"... starting tomorrow. I will review bonds, leases, deferred taxes, and pensions in a hard chair. 

I chose this path, that is being a full time student, a full time employee, a husband, and a dog owner. It could be worse. There is a guy in my section who had his first child last week. I don't know when he is going to have any time to, say, sleep... But in any case, I am going to stop sulking, buck up, and finish this quarter out strong. I began this journey with aspirations of making the dean's list, participating in a business plan competition, and ENJOYING the journey.

So welcome to the stress free blog about a guy, somewhere on the west coast, who is going to MBA school at a top 50 ranked institution. Stay tuned for positive comments, jokes, and stories of other FUN times as I journey through Business School. I would start now, but I'm all tapped out :)

Pausing Business School: A Weekend Trip to Portland

If you have been reading my posts for any amount of time, you know that these last several weeks have been quite taxing (no accounting pun intended). Well, I am not sure if I have mentioned this, but I am married, so you can imagine that my wife has been missing me a great deal. 

In genius anticipation of this problem, I recently planned an entire weekend trip to Portland, OR that we would go on this weekend (the weekend after the last midterm). It seemed like a perfect destination, still on the west coast, but different and far enough away to feel like a vacation. It also happened to be my wife's birthday on Sunday, so it seemed like a good plan.

We arrived at Hotel Lucia on Saturday night for a 2 night stay. We filled the weekend with wonderful food, several walks, shopping, and a fantastic 90 minutes at Barefoot Sage (an entire spa dedicated to foot massages and treatments).

Here are some of the restaurants we went to:

Apizza Scholls (The best Pizza ever!)

Mothers Bistro

Oba

Kenny and Zukes

This was a fantastic break from Business School, work, and just life in general. It was great to reconnect with my wife and to reward ourselves for some real sacrifices over the last several weeks.

On a slightly less relevant note, there is no sales tax in Oregon. I can't help but wonder what the economic implications of that are. I can tell you for sure that waiters/waitresses get bigger tips. Certainly, it must attract tourists and shoppers. Do you know what it's like to see a restaurant bill with a subtotal of $30.03 and a final total of $30.03? It's like a discount.

I mean, take Vancouver, BC, where an American dollar buys $1.20 Canadian dollars (as of last week). This translates to 0.83 American dollars per Canadian dollar. However, Vancouver has a 14% sales tax, which makes it equivalent to 0.95. Combine this with the price index in Vancouver, much higher than Portland, and Portland is looking pretty good.

...sorry about that, the wheels are always turning. It was a truly wonderful weekend. And in case my wife is reading this, I wasn't thinking about the sales tax thing while we were there sweetie.

Stay tuned for more entries as I get back to Business School this week.

Business School attacks again... not sure I survived this time.

If you are thinking about going to business school, don't let this post scare you... 

So, the long awaited Econ test finally arrived last night. I finished up my 11 hour day at work at 4:50PM and hit the road for my 35 mile commute to school. It usually takes about 45 minutes to get there, but yesterday it took 1 hour and 20 minutes. I arrived on campus at 6:10PM... the midterm started at 6:00 - ah, the joy of evening Business School.

Tired from my sprint to class, I exchanged awkward glances with the professor, grabbed a test, and sat down. This was not a good start (1 hour and 29 minutes on the clock).

It was right about here that I began to appreciate my 11 hour take-home Accounting exam...

The first question (Income price elasticity and indifference curves) took me 40 minutes (49 minutes remaining). I erased and redrew graphs with my 3 colored pencils several times as I answered the question. 

The next question was on firm supply costs and it took me about twenty minutes. I was put in the place of a KFC owner losing money and had to decide whether to advertise to get more business or shut down (29 minutes remaining). 

The third and fourth questions are a blurr, but I remember something about a taxi cab shortage, limited licenses for sale, fixed prices, and a mayor who wanted to increase the number of cab rides offered. I finished the fourth question with 9 minutes remaining.

The  last question was a "special" multiple choice. The directions said that there could be one, several, or zero right answers given. It also said that you could show your work for an opportunity at partial credit, but if your answer was right and the work didn't fully support it, you could lose credit too.

Finally, I skimmed the test answers, labeled some axes, panicked, and listened for the, "time's up".

I left the classroom in a daze. My ears where red and burning, my scalp tingling, and my back in knots. This was one of the worst feelings I've had on a test in a long time. I either did well, OK, or horrible. 

Stay tuned for the results. 

By the way, I received a 91/103 on my Accounting midterm. Not as good as I hoped, but nothing to complain about.

...the living room is repainted and new curtains hung, but we are still waiting on the new sofa.

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.