Category Archives: Politics

Business, Politics

Lessons from a Masters In Business Administration: About Management Consulting

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About Management Consulting: conventional wisdom states that if you start working at a consulting firm as a single person, you will stay single, if you arrived married you will risk ending-up getting divorced. People with families get fired first at a consulting firm. Other consultants talk about the unending meetings, the way bosses might mislead clients by offering less-than-useful advice accompanied by fancy presentations. Consultancies are full of intellectuals but cutthroat ones. You might encounter a formula as follows: Change = f(D x M x P)+E. In other words, change is caused by the level of (D) dissatisfaction, the new (M) model to resolve it, (P) the process for that change, and plus E is error. This is a classic over-complication of an obvious reality that change is caused by dissatisfaction, and requires a solution that is planned. This kind of equation, although novel is an example of what a consultancy might sell to a client as part of their services.

About Finance Jobs: finance jobs are built around squeezing as much out of employees as possible. You might be expected to leave at 4am, then sleep in a car, then drive home to take a shower, and do it all over again. Did anyone mention the salary, though? You should read Roger Lowenstein’s Warren Buffett, The Making of an American Capitalist.

Summer Jobs: everyone will be applying for summer jobs early on. Being in an MBA program makes you highly sought after. You might be asked in an interview for an investment banker job: “What makes a stock-price move?” You should not say that; fundamentally, it’s a change in expected future earnings, but what influences those changes is a mystery. Some believe it is all rational, based on forecasts, others say there is a herd mentality….the competition will be insane for these positions, and those who naturally fit within a given organization will succeed.

Research is Paramount: understanding a business model will make you an effective investor. You only hear about the success stories, and you never hear about the failures.

[This is a synopsis of several books on the MBA experience including What They Teach You At Harvard Business School by P.D. Broughton]

Business, Politics

Lessons from a Masters In Business Administration: Risk/Reward & Predicting Cash-Flow

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Risk and Reward/Predicting Cash-Flow: Investors think as much about risk as they do reward. Most people tie their investments to resources, expecting them to grow, and with it, their own rewards. Where rewards are expressed in percentage growth, risks are harder to characterize. Guessing a company’s future cash-flow involves looking at past revenue, you then make reasonable assumptions based on how the new product will fair or how their rivals will be purchased. A dollar today is worth more than a dollar in a year’s time so if I buy a one-year bill that promises 5% interest, you will have $1.05 next year. Whereas a dollar next year is just a dollar. If I want a dollar next year, I could buy 95.2% worth and have the 4.8% to spend. This works with the federal government but a company or angel investor can expect to demand a higher return to compensate for the risk of their capital. The next step is to determine what the return on investment would be for these investors. Opportunity costs; it’s better to invest in an apartment than a stock. Apartments are illiquid, and it is much easier to trade in and out of other investments. Savings have low returns because they are highly liquid. If you tied up your money for a long period, it would bring about higher returns. Imagine a house party where you are going to meet the person of your life. If you didn’t go to that house party, then you would have missed out and the risk is enormous. Risk is actually not just the possibility of a bad thing happening, but of something good not happening.

[This is a synopsis of several books on the MBA experience including What They Teach You At Harvard Business School by P.D. Broughton]
Business, Politics

Lessons from a Masters In Business Administration: Beta Measures

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Beta Measures: describes the risk of a stock. A beta of 1 implies that the stock, on average, tracks the market perfectly. If the market goes up 5% so does the stock. Beta 1.5 would mean the stock goes up 7.5% or if the market goes down, the stock goes down by -7.5%. Therefore, a low beta stock is less volatile than the market. So starting your own company is high-beta, and working in a consultancy is low-beta.

Note however that there are skeptics like Warren Buffett because a perfectly good company with strong revenues, low costs, and a sustainable competitive advantage might one day have the CEO kill herself. Suddenly it is a high beta stock. So beta is not a good way of measuring a business’ value. Alpha is a better measure. Warren Buffett is good at what he does, he found his alpha. It is basically the value add that one person gets over another person that does the exact same thing. Picking the right investments, and bundling them together is all about finding companies that have that alpha.

To gauge if a company is worth investing in, you should ask: do they work hard? Are they honest? Likable? Creative? Entrepreneurial? Do they spend more than they earn? Are they mortgaged to the hilt? What if they lost their job tomorrow? Would they find another one quickly? Look at how they prioritize their spending, and you will see how they prioritize their life.

How To Think In Consultancies: you need to reach big conclusions from a handful of numbers. You have tylenol sales from one store, and the number of people who use the store, then the number of (as a percentage) people who live in the area, then apply it nationally. And you gross the sales at that original store to get a national estimate of Tylenol sales. That’s how you have to think in a consultancy.

[This is a synopsis of several books on the MBA experience including What They Teach You At Harvard Business School by P.D. Broughton]
Business, Politics

Lessons from a Masters In Business Administration: Leadership and Corporate Accountability Class

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Leadership and Corporate Accountability Class: Leadership & Corporate Accountability Classes teach MBAs to avoid chasing money down sewers. Ethical moments do not come with labels. M x F = D which means that a court decision (D) is the product of a legal model (M) and the facts (F). Is bluffing true ethics? Business seems to be about playing with a set of rules, and not seeking the higher ground. If you found out that hackers had broken into your credit card system you are obligated to tell your customer immediately. If you are bluffing your business with people’s lives in the balance, you are breaking an ethical code in many peoples opinion…think Jeff Skilling at ENRON. HBS shoulders a lot of blame over the years in business, so they have tried to quantify ethics, and leadership to counter-act this problem. People are taught accounting on the condition that they do not then manipulate their company’s earnings or minimize taxes to such an extent that it amounts to crime or ethical problems.

Lavish Executive Compensation: mediocre CEOs in the US and Europe are habitually paying themselves as if they are entrepreneurs or athletes. Is this wrong? Friedman hated the idea of companies donating to museums or sending employees to work in homeless shelters. That is robbing shareholders. Companies have a moral and economist purpose. The best employees want to work for good companies with good cultures, not just maximizing ones.

[This is a synopsis of several books on the MBA experience including What They Teach You At Harvard Business School by P.D. Broughton]