The Dearborn Supper Club

On My Study Abroad Experience at London Business School

2009-04-25T13:57:00.000-07:00

From January to March 2009, I studied abroad at London Business School. It was a phenomenal experience, which I was lucky to get; I was one of 10 students selected among a pool of 40 Kellogg applicants. I've written an article about my experiences for the latest issue of our school paper, The Merger:

One cold afternoon in mid-January 2008, I found myself sitting in a quiet corner of the Jacobs Center, thinking of how to answer questions from the study abroad application due on the following day. I won’t lie, I had no intention of studying abroad when I applied to b-school. However, two fateful conversations changed my mind and led me to one of the defining experiences of my MBA career.

The first of these conversations occurred when Pavan Singh encouraged me to attend the study abroad session and think about London Business School (LBS). So I did. The opportunity seemed intriguing enough, so I asked friends for their opinions. In the second of these conversations, over beers at TG, Matteo Cortese told me, “London isn’t a British city. It’s a European city!” and explained that it’s one of the most diverse and cosmopolitan places in the world where people from all over Europe mix.

Matteo’s description of London swayed my decision to apply for LBS because I sorely lack international experience, having been born and raised entirely in the U.S. Given the global economy, developing a more international mindset is critically important to me. Thus, I saw studying abroad in London would allow me to gain a tremendous amount of exposure to not just British culture, but cultures across Europe and the world, in only one short quarter.

After being accepted to study at LBS, I began thinking about what I hoped to gain from the experience. I broke it into 4 buckets: travel, cultural exposure, networking, academics.

In terms of travel, I’ve traveled much less than I initially planned. A friend at LBS, Valeria, told me, “The opportunity cost of traveling every weekend is extremely high. You could make friends with people from all over the world at LBS!” While I haven’t quite met people from everywhere, I’ve made a bunch of great friends. Moreover, I’ve gotten to really explore London and develop a great love for the city.

As for cultural exposure, this has been a process of my realizing that many things I took as cultural constants are actually variables in other societies. Conversations on topics both profound and mundane have shed light on many things that I never would have considered. On one occasion, a Japanese friend, Hiro, explained that the Japanese hate seeing brilliant people become wildly successful in a short time. This stands in clear contrast to America’s brash Silicon Valley, Liar’s Poker business culture. Throughout the months, I’ve slowly developed a more international mindset.

In networking with both LBS and other exchange students, I’ve befriended mostly Americans and people from the former British Commonwealth. Not quite as global of a group as Valeria suggested. However, I have to compliment the LBS administration and student body for doing a much better job of integrating exchange students than we do at Kellogg, because a third of their class studies abroad. Interestingly, less networking is done around campus. LBS classes are held in one 3-hour block, as opposed to two 1.5-hour blocks like at Kellogg, so they are not forced to be on campus as often. Many students make up for this by constantly being at nearby pubs.

Lastly, my academic expectations for LBS have been met. The Kellogg students who studied at LBS previously set my expectations low. I find the classroom experience at Kellogg to be more gratifying. The workload here is also about half of what it is at Kellogg.

One thing that I’ve been pleasantly surprised by is that LBS has done a fantastic job in creating a global environment. The administration limits the percentage of the students from any one country, so no dominant cultural faction exists to influence the school culture. Of course, this means that they don’t obsess over the 1980s as we do. But, it also means that students are more patient and understanding with each other. In another conversation, Hiro explained that because of this, he feels more comfortable being himself in London than he did in Japan, where he’s expected to conform to a cultural mold. As such, I believe that this helps to integrate students from all different cultures to a much extent than I see at Kellogg.

That said, I’m glad to be back at Kellogg. However, I now see my cultural assumptions in a different light and I promise to be much more patient with everyone. Despite all of my great experiences at LBS, I’m more firmly convinced that I made the right choice in attending Kellogg. Though, if asked, “Knowing what you know now, would you still choose to study abroad?” I would answer, “Absolutely!”

Kellogg High Tech Conference Notes

2009-04-16T06:42:00.000-07:00

Yesterday, I attended the Kellogg high tech conference. It's consistently the best conference that I attend at b-school. This year, some of the keynote speakers were lackluster. Someone from SAP, clearly a salesman, came up to talk about leadership. I zoned out after he threw a slide up with 10 buzzwords on it, the most egregious case of buzzword bingo I've ever seen. However, the panel discussions were incredible. Since I'm awful at keeping paper records, I've jotted some of my key take-aways from the conference on here.

Adobe keynote speaker:

3 major computing trends:

Cloud Computing
Social Computing
Device + Desktop - users in future may never have a PC, may go straight to mobile computing devices (e.g. Blackberry, iPhone, etc.). Companies are beginning to build applications for devices first, then scaling them up for use on a PC.

3 future business models:

Ad-based
Subscription
Freemium - give away to 99% of people, charge the 1% who value it most

3 software models in the future:

Microsoft - you must buy the client
Google - (didnt get the notes for this one)
Adobe - client tech is free, pay for software to create

Learnings:

People will tell you what they're willing to pay for if you ask
Business people want to pay for software, because that obligates you to give them support

Panel Discussion: The Future of Mobile

Featuring representatives from Palm, Motorola, Alcatel, Salesforce and Novarra

The future of wireless operators:

Wireless operators need to incorporate services/apps into their packages to prevent themselves from becoming dumb pipe. These apps need to be unique things that the handset and content creators cannot do.
U.S. carriers used to have tight control over content on their network, until Apple broke their control in negotiations with AT&T over the iPhone. Now handset makers expect to whittle away at the carriers' control. Europe always has had looser controls.
Carriers need to view connectivity holistically - wireless + wireline. In the future, everyone will have 2+ connected devices
Carriers opening up user access to buy mobile device apps from 3rd parties has increased their own app sales.

Lack of standards is costly:

6 OSes in the wireless space, so developed have big decision about who to support
Will 1 OS become dominant in the future?
Salesforce has to create a different version of its mobile app for compatibility with every type of OS
On the bright side, cloud computing has lowered the variability between OSes

The future of smart mobile devices:

As their capabilities increase, smartphones will become the new center of gravity in personal computing, but the PC will still be around for the big screen experience and multitasking capabilities
In developed world, smartphones serve as entertainment devices for the most part
In developing world, mobile devices become lifestyle enablers. They're used as wallets to pay bills wirelessly, to check grain prices, fish prices, make sales to markets prior to transporting grain/fish to the markets.
Huge ecosystems are necessary to enable the mobile phone as a wallet: mobile carrier, handset maker, banks/credit cards, etc.
Many in developing world will never see wireline connections. Wireless connections are much cheaper to put up.
Machine-to-machine applications will begin appearing. Putting wireless readers on power meters will allow utility companies to instantly get information on the power grid. This will allow them to more efficiently direct electricity to areas of the grid during their times of heaviest usage. Much energy is wasted if it's directed form plants to neighborhoods that don't use it.
Cheap "all you can eat" wireless data will only become available once some wireless carriers go bankrupt and their wireless assets are recapitalized. e.g. when WorldCom went bust, its wireline assets were sold off cheaply, which enabled cheap broadband internet to come about.

Disney keynote speaker on digital content business models:

Consumer Experience: the consumer knows he's king now. Internet allows dialogue between content consumers and creators. Consumers have more choices than ever before, so you need to engage them when creating content.
Monetization: media start-ups are beginning with "monetization first" idea, because once you train consumers to expect to get content for free, they will never agree to pay. State upfront your billing model and consumers will respect that.
Media forms in the future: long, short, snack-size
Rich experiences will be important for future media properties: content + online experience + games (Blu-Ray DVD provides medium for much content and online stuff)
Cross-platform experiences will come about: TV/mobile/PC/console - will be able to seemlessly migrate across platforms soon
Always treat technology as an enabler for content, not as the point in itself

Digital Marketing Panel:

featuring McDonals Europe, FedEx, Google, Vibes Media

2 enablers to the internet revolution:

Broadband proliferation
Digital storage prices drop

3 fundamental changes to the internet:

Social
Mobile
Video

Content:

Content now migrating from local devices to the cloud. No longer do you lose all of your photos, contacts, documents when you lose your laptop, because it will all move to the cloud in the future.
Everyone wants portability of content across all devices.

The physical internet:

Fed-Ex thinks of its business as: content + physical = global access
It describes a Celtic drum maker shipping client from Ireland. His clients search for their family crest on the internet, orders a drum head with their family crest from a specialized family crest maker who ships them to the drum maker. Drum maker makes the custom drum, ships it to the person who ordered it. Before the internet and Fed-Ex, the drum maker would only have a small shop in a small town.
Fed-Ex did a social netowrking experiment. After a few failures, they hit on a success by putting their small business clients who do international shipping across the Canadian-US border and those who do not ship internationally across the Canadian-US border. It turned into a very successful, strong community of people sharing ideas and tips when pulled together. Key learning - social communities with a common purpose will thrive

Digital marketing:

Digital advertising: conversions is the key metric. How does your website build intent to purchase?
Traditional advertising: goal is share of voice and building awareness. Fine if low brand awareness, but no good if 99% brand awareness (e.g. Fed-Ex)
Co-locate IT and Marketing to speed development of digital marketing campaigns.
Digital media spending is easier to justify in a downturn, because of clearer metrics
During downturn, Google has discovered that people have become pickier in what they choose. If they can only go out to dinner 1 time a week, versus 3 times before, they want to have the exact experience that they want. They won't compromise. Digital marketing can help target consumers' spending, help them decide on your brand, etc.
It's still critical to understand traditional media - it consists of 70% of advertising budgets

Awareness --> Brand Trust --> Consumer Advocacy

Brand trust - knowing what to expect from a company. It's built from all of the touch points in your company - everyone that the consumer interacts with, from the website to customer service to delivery man, etc.
If consumers trust the brand, you'll get consumer advocacy, people touting your brand for free.
Fed-Ex uses a consultancy to monitor all web postings about their business, so that its customer service operations can fix any problems with the customer immediately. Negative publicity can spread quickly on the internet and hurt brand equity.

Atlas Shrugged

2009-01-10T04:23:00.001-08:00

This book has just moved up on my reading list. WSJ commentary on the book.

On the Wrong Side of Madoff

2009-01-10T04:07:00.000-08:00

I just read an article called, "I was fleeced by Madoff" by a lady who lost her life savings to his fraudulent schemes. Very sad and scary. While I encourage you to read the whole article, I'd like to share some interesting points of view that the author had thought the author had.

Before the phone call I had 30 years of retirement savings in a "safe" fund with a brilliant financial guru. When I put down the phone, my savings were gone and my genius financial guru, Bernie Madoff, was in handcuffs. I felt as if I had died and, for some unknown reason, was still breathing.

I can't even imagine having such a phone call telling me that my world has been shattered.

It was always more important for me to find work that I loved than to be rich. I know this is a ridiculously privileged attitude since so much of the world must concern itself with getting food. But I was (and still am) one of the privileged: I've always had clean water, clothes to spare, enough to eat.

I've thought about this before, but I've never been able to crystalize it as well as she has in 2 sentences. It puts the devastation of getting into McKinsey/Goldman/Microsoft/etc. into perspective. My conclusion has been to not feel guilty about having such opportunities, but to appreciate them more by understanding how priveleged I am and to think about how I can contribute to the betterment of the world.

Then I realize that, for me, the real suffering is not living without money; it's living with this rage. The devastation is horrible, but if I don't allow myself to feel this, then I can't learn what there is to learn. I will not see, for instance, that I participated in the fraud by being willing to close my eyes about what Madoff was doing.

I often asked Richard, the head of our feeder fund, how Madoff made such consistently good returns. Although Richard tried to explain it to me, it was clear he didn't know, either, because I'd leave our meetings still unable to explain to anyone else how it worked. But that didn't deter me

I can't even imagine the range of emotions she must be feeling. It's easy to point fingers at people who were defrauded, but the world is so complex that we can't have a deep knowledge about everything, so we have to trust experts by necessity. I'm too trusting of experts and need to be more critical of them before I fully trust what they say.

Kellogg Course Bidding System: Hyperinflation or Pricing Things Right?

2009-01-04T08:14:00.000-08:00

For the January 2009 issue of the Merger, I wrote an article about Kellogg's course bidding system:

“Some classes are becoming astronomically expensive. People are bidding irrationally!” wrote one student in a Merger survey about Kellogg’s course bidding system. Following the 1st Year students’ first bidding experience, it is certainly a sentiment to which many students at Kellogg can relate. Given this experience, many may wonder why the Kellogg course bidding system has been set up the way that is and how to best deal with the course bid inflation?

THE KELLOGG SYSTEM AND ITS CRITIQUES

Since spots in the classes of well-regarded professors are scarce resources, Kellogg has created a course bidding system to distribute them in an economically efficient manner. The system is modeled after a Vickrey auction, or second price sealed-bid auction. In such auctions, bidders submit their bids in a sealed envelope to the auctioneer without knowledge of other bids. The bidder with the highest bid wins, but pays only the amount of the highest non-winning bid. In the Kellogg course bidding system, each section of each class is set up as an individual auction, with upwards of 80 seats for sale depending on the class’s capacity. Students can bid in up to 5 auctions for seats in various classes. All winning bidders pay an amount equal to the lowest winning bid, rather than the highest non-winning bid.

As a Vickrey auction, the Kellogg course bidding system is subject to the auction’s benefits and weaknesses. One prominent benefit of the Vickrey auction is that its “second price” stipulation minimizes the Winner’s Curse, thus giving bidders the incentive to bid their true valuation. Without it, bidders may be afraid of overpaying if they think other bidders have better information, causing them to bid lower than their true valuation. Paying the “second price” incorporates some of the other bidders’ information into the winning bid.

However, the Vickrey auction has several weaknesses. First, it does not allow for “price discovery” if bidders are unsure of what their true valuation are. This is a problem for items whose values are not easily determined, such as art and classroom seats. In contrast, an English auction, which is used in many art auctions, allows bidders to see how much others are bidding to calibrate their own values. This weakness is partially solved by making course bid history available. Second, it is susceptible to shill bids, where sellers can enter fake bids to increase their profits at the expense of buyers. In the Kellogg system, shill bids are made by students who submit artificially high bids for classes only to later drop the classes. While those students retrieve their bid points for the dropped class, all other students in the class are still charged the higher amount.

Ryan Goldman, a 2nd year student who based his final project in the Spreadsheet Modeling class on the bidding system, observed some of these weaknesses in his analysis. Critiquing the system, Mr. Goldman says, “You want something that doesn’t involve so much guesswork and so much period-after-period inflation. The Kellogg model [increases] those two things. People have very, very little certainty when they enter a bid and they’re not able to budget correctly because of inflation.” As a result, he says, students often overbid for classes that have historically closed for 1 point, preventing them from allocating those points to bid on more expensive classes.

Many of the 140 current students surveyed by the Merger agreed with these critiques. Although they consider the system to be fair and effective, many complain about bid inflation and that not enough sections of the most popular professors’ classes are offered. In spite of this, students mostly feel that they have effective bidding strategies, typically spending between 1 and 3 hours to formulate them.

However, the system incentivizes some interesting group behaviors. For popular classes, students routinely bid higher than what the classes have closed for in the past. Others bid all of their points every quarter in hopes of getting points back, which they were advised to do by 2nd year classmates. These strategies are one cause of bid inflation. Other students bid uncommon numbers (e.g. 511 instead of 500), which explains the strange closing bid amounts seen in bid histories. One student “aims for good professors and undesirable time slots,” which historical bid results suggest is fairly common; less desirable 8:30am sections of several popular classes sometimes close for more points than more desirable 10:30am sections.

To improve the system, students suggest penalizing students who drop classes more heavily, which could potentially solve the problem of students who inflate classes by bidding high and later dropping them. Additionally, some students suggest listing more classes as having 2nd year preference to restrict competition and allow 2nd years to take important classes before they graduate.

IS THE GRASS REALLY ALWAYS GREENER?

In weighing various trade-offs, many top MBA programs have settled on different approaches to distribute classes. MIT Sloan and Chicago Booth have chosen methods similar to Kellogg’s system. In contrast, HBS and Tuck use a lottery system where students rank the courses they want to take. At HBS, a computer program then uses a lottery to determine the order in which to grant students courses. This approach puts much emphasis on luck, to which some may object in favor of having more control over the outcome.

The most complex system is Wharton’s, which resembles a financial market. It consists of a 10-round Vickrey auction process, an aftermarket that allows students to re-sell their classes, and the injection of additional “currency” into the market after each semester. Course bidding takes place over a 10 day period, each round lasting 1 day. After buying classes in the first round, students can re-auction their classes in future rounds. At the start business school, students have 5,000 bid points and, at the end of each semester, receive 1,000 additional points for each class that they took in that semester. To illustrate, if a student with 5,000 points bids only 3,000 points on 5 classes in one quarter, he carries over 2,000 points and later receives an additional 5,000 points. Thus, he will have 7,000 total points to bid in the next quarter. As a result, students speculate on courses that they do not intend to take and some courses are sold for as much as 10,000 points.

While some Kellogg students surveyed suggested having an aftermarket, it could potentially lead to speculation on classes by many students. In turn, this may result in more drastic bid inflation for popular courses and accusations of opportunism.

IN SEARCH OF A HAPPY MEDIUM

The current scenario of bid inflation resembles a prisoner’s dilemma in which all students to continually bid higher than those in the past. To stop bid inflation, Mr. Goldman says that unless all students heed the advice to stop bidding so much for classes, those who do will be harmed while those who do not will benefit. Jokingly, Mr. Goldman advises the Class of 2011 to, “Stop bidding so much!” in an attempt to pre-empt the typical 2nd Year advice to always bid all of one’s points. While the problem may be partly solved by increasing penalties for dropping classes, a complete remedy would be difficult if not impossible.

Of his own bidding strategy, Mr. Goldman says that his risk aversion drives him to avoid the expensive classes altogether. In doing so, he says, “The downfall of my experience at Kellogg is that I didn’t take Negotiations, I didn’t take Fin D. I didn’t some of these more popular classes.” However, he has enjoyed his classes at Kellogg, stating that many of his favorite classes have cost him only 1 point.

Only by understanding the system’s flaws and quirks can students most effectively formulate their bid strategies. As Mr. Goldman’s experience may suggest, the herd mentality that causes a greater aggregation of points to be spent on a smaller number of courses means that many more courses are being auctioned off for fewer points. Fantastic courses taught by excellent professors may be undervalued by the Kellogg community and had for as little as 1 point. Although there is much to be said of the wisdom of crowds, students should also remember that they may benefit greatly from contrarian bidding strategies.

Despite its flaws and quirks, students feel that the system works. Perfectly articulating the system’s purpose, one surveyed student wrote: “Surely, it is not possible to give everything to everyone.” But, it allows all students to get the classes they value the most if they bid correctly.

Chinese Savings Helped Inflate American Bubble

2008-12-26T08:43:00.000-08:00

The latest article in the NYTimes' series about the financial crisis, called "The Reckoning," is titled, "Chinese Savings Helped Inflate American Bubble." It's quite an interesting read. The opening quote, made by financial historian Niall Ferguson, is great: “Usually it’s the rich country lending to the poor. This time, it’s the poor country lending to the rich.” The two main points that I took away were 1.) that we're addicted to borowing in America and 2.) that Chinese people are not going to start spending anytime soon.

Of the first point:

In the past decade, China has invested upward of $1 trillion, mostly earnings from manufacturing exports, into American government bonds and government-backed mortgage debt. That has lowered interest rates and helped fuel a historic consumption binge and housing bubble in the United States.

In hindsight, many economists say, the United States should have recognized that borrowing from abroad for consumption and deficit spending at home was not a formula for economic success. Even as that weakness is becoming more widely recognized, however, the United States is likely to be more addicted than ever to foreign creditors to finance record government spending to revive the broken economy.

It's pretty appalling to me that the pork barrel politics will not stop anytime soon. As much as I subscribe to democracy as a political philosophy, perhaps the lack of discipline in spending is one of its failings. When the federal government's purse strings are loosened, all of the hands begin dipping voraciously into the purse. State representatives furiously write lines into important legislation that appropriate money for their own states' constituents, for either necessary or unnecessary projects, thus ballooning federal spending and, in turn, the national deficit. Any representative who doesn't participate in the mad grab for money seemingly martyrs his/her constituents for the greater good of financial discipline, but I suspect will most likely have his/her piece of the pie appropriated by someone else. But I have no idea how to fix this problem, which worries me. It looks like a repeated prisoner's dilemma game, except where the payouts of the equilibrium of "cheat, cheat" is greater than "cooperate, cooperate" for the first few periods of the game, then suddenly all payouts become extremely negative following the 2 players' choice to play "cheat, cheat" for so long.

I stated my thoughts on how American consumers behave in an older post.

Of the second point:

Mr. Bernanke viewed such international investment flows through a different lens. He argued that Chinese invested savings abroad because consumers in China did not have enough confidence to spend. Changing that situation would take years, and did not amount to a pressing problem for the Americans.
...
Proponents of revaluation [of the Chinese currency] in China argued that the country’s currency policies denied the fruits of prosperity to Chinese consumers. Beijing was investing their savings in low-yielding American government securities. And with a weak currency, they said, Chinese could not afford many imported goods.

The central bank’s English-speaking governor, Zhou Xiaochuan, was among those who favored a sizable revaluation.

But when Beijing acted to amend its currency policy in 2005, under heavy pressure from Congress and the White House, it moved cautiously. The renminbi was allowed to climb only 2 percent. The Communist Party opted for only incremental adjustments to its economic model after a decade of fast growth. Little changed: China’s exports kept soaring and investment poured into steel mills and garment factories.

But American officials eased the pressure. They decided to put more emphasis on urging Chinese consumers to spend more of their savings, which they hoped would eventually bring the two economies into better balance. On a tour of China, John W. Snow, the Treasury secretary at the time, even urged the Chinese to start using credit cards.

China kicked off its own campaign to encourage domestic consumption, which it hoped would provide a new source. But Chinese save with the same zeal that, until recently, Americans spent. Shorn of the social safety net of the old Communist state, they squirrel away money to pay for hospital visits, housing or retirement. This accounts for the savings glut identified by Mr. Bernanke.

It's amazing to think of how drastically governmental programs that provide a social safety net can change people's behavior. In the U.S., we have social security (which some people have recently called "the largest ponzi scheme of all" in reaction to the Madoff fraud), unemployment, medicare, alimony and child support, just to name a few. As someone in the U.S., I've taken these protections for granted until I realized that in other parts of the world, these things don't exist. Instead, people have only their families to rely on as safety nets. These programs allow workers in the U.S. to spend time to figure out what the best fit job for them is, which helps to promote worker morale and workforce efficiency. It alllows the U.S. to have looser laws on when a company can fire someone, which makes it easier for businesses to grow without fear of being overwhelmed by payroll expenses in a downturn. Contrast this with India's labor laws, where it takes upwards of 10 years to lay-off a worker, which make businesses incredibly gun-shy to hire anyone.

But when do we become too comfortable? When do we focus so much of our attention on consumption at all costs, rather than production and saving? Granted, the Chinese are so uncertain of what their government's policies will be that they store away every penny in to the Chinese banking system, which the Chinese government taps as its personal piggy bank. But I've seen McKinsey studies that state that around 70% of the U.S. economy is driven by consumer spending, whereas consumers drive only 30% of the Chinese economy. This statistic is scary in light of the fact that the remainder can be attributed to government programs and investments in infrastructure and education. These investments will allow China to rapidly catch up to our productivity if we don't keep investing to stay competitive in the world.

John Adams famously said, "The science of government it is my duty to study, more than all other sciences; the arts of legislation and administration and negotiation ought to take the place of, indeed exclude, in a manner, all other arts. I must study politics and war, that our sons may have liberty to study mathematics and philosophy. Our sons ought to study mathematics and philosophy, geography, natural history and naval architecture, navigation, commerce and agriculture in order to give their children a right to study painting, poetry, music, architecture, statuary, tapestry and porcelain." It's a great quote, and I strongly believe in the value of a liberal arts education, but I wonder if too many of our sons are exclusively studying painting, poetry, etc.

Commit and Execute

2008-12-17T16:39:00.000-08:00

Presently, I'm on the annual Kellogg ski trip in Steamboat Springs, CO. Today, I've forced myself to start committing and executing on the ski hills. Whenever I have any uncertainty of my ability to do something or deliver something, I have reservations while I execute. The results turn out not to be my best work, because I focus on not screwing up and tense up rather than on doing my best or winning. When I have a tight deadline in the office, this translates into me having brain lock as a result of constantly being nervous about whether I can deliver on time. I either deliver below my abilities or stay late at night to finish the work to my standards. On the ski hills, this means that I doubt my own abilities and end up falling when I get nervous.

Prior to going on the ski trip, I had told everyone that I would not snowboard because I kept falling so much last year and was in great pain for most of the trip. That quickly changed. As the ski trip approached, I started thinking about taking 1 lesson to see whether I would improve. Yesterday, I took the lesson and did incredibly well. In 5 hours, I progressed from not being able to ski down a green trail without falling several times to being able to ski down blue slopes with no problems. Today, I skied exclusively blues and went down a black diamond at the end (though I fell on the moguls the entire way down).

This afternoon, while I was snowboarding down a blue slope that required me to gain a lot of speed, I would tense up and constantly fall because I was scared to go fast. When I thought about my reactions, I began forcing myself to commit to gaining speed instead of tensing up. The results were great; I stopped falling as much and improved quickly after that point. Rather than tensing up and reacting frantically when I gained speed, I started to accept what was happening and reacting appropriately.

In general, I feel like there's a point where I need to make high-level decisions and a point to simply execute and not question those decisions. Of course, there needs to be room to change course and reflect. But at some late point of the decision-making process, I think the only thing I should focus on is executing well. My commonly used analogy is that I've gone over Niagra Falls in a barrel; the only thing I can do is brace for impact.

Maybe this analogy is problematic because it focuses on not failing as opposed to succeeding with flying colors. In one of my classes, I read a case about college basketball coach Bobby Knight who focuses on process, not outcome. He trains his players to do all of the right things to win. He'll yell at his players even when they win if it was a sloppy win. Conversely, if his players do nothing wrong and execute perfectly but still lose, he'll compliment them all night long.

Perhaps a better anology would revolve around binary results, to succeed brilliantly or to fail miserably. Framing it in that way leaves only one choice: to execute with full confidence without knowing the outcome. What happens when you don't commit and try to bail halfway? Here's a clip from a rollerblading video I saw years ago.

(Youtube Video Link)

My conclusion: be reflective and plan well early in the decision-making process, but once I commit to a decision, I must ALWAYS execute with full confidence.

China says, “Be Nice to the Countries That Lend You Money”

2008-12-14T09:03:00.000-08:00

In its December 2008 issue, the Atlantic Monthly featured a fantastic interview with Gao Xiqing, one of China's head lenders to the U.S., titled,"Be Nice to the Countries that Lend You Money". Currently, China holds $2 trillion in U.S. dollars. Mr. Gao manages $200 billion of these, lending to Morgan, Blackstone, etc. Suffice it to say that he's quite an important man to the U.S. right now.

As a person, I find Mr. Gao interesting because he seems to be part of the new guard in the Chinese bureaucracy: U.S. educated, experience as a legal professional in the U.S., jovial rather than stern demeanor and very international in mindset.

During the interview, Mr. Gao makes some interesting and humorous points. He comments that people in China have been joking about the U.S. bailout of financial institutions as, "socialism with American characteristics," which is a play off of China's characterization of its own economic system as, "capitalism with Chinese characteristics." He comments on how the American government should have consulted more with the Chinese, Russians and Japanese regarding the bailout, since they are the ones funding a large part of it. It's quite interesting to think that China cannot pull its capital out of the U.S. currency right now, even if it wanted to, because it would cause a collapse in dollar value that would upset the balance in the international economic community - not to mention China's dependency on the U.S. as an export market. It feels like a repeated prisoner's dilemma game between the countries that have large holdings in the U.S. dollar and U.S. debt where the best strategy is for all parties to cooperate by holding their U.S. dollars. About the Chinese popular perception of China's lending to the U.S., he says, "People here hate it. They come out and say, “Why the hell are you trying to save those people? You are the representative of the poor people eating porridge, and you’re saving people eating shark fins!” It's always that sort of thing."

Another really interesting piece of commentary he has is about the U.S.'s persisting view of itself as superior:

Question: And how should Americans feel about the growing Chinese presence in their economy? Isn’t it natural for them to worry that China will keep increasing its stake in American debt and assets—or that China won’t, essentially cutting America off?

I can understand why Americans might feel that way. But, talking with my lawyer head once again, it’s not relevant to discuss how Americans “should” think. We should discuss how Americans might think.

This concern is not really about China itself. It could be any country. It could be Japan, or Germany. This generation of Americans is so used to your supremacy. Your being treated nicely by everyone. It hurts to think, Okay, now we have to be on equal footing to other people. “On equal footing” would necessarily mean that sometimes you have to stoop to appear to be humble to other people.

And you can’t think as a soldier. You put yourself at the enemy end of everyone. I grew up during the Cultural Revolution, when people really treated other people like enemies. I grew up in an environment where our friends, our relatives, people I called Uncle or Auntie, could turn around and put a nasty face to me as a small child. One time, Vladimir Lenin told Gorky, after reading Gorky’s autobiography, “Oh my god! You could have become a very nasty person!” Those are exactly the words one of my dear professors told me after hearing what I went through.

But over the years, I believe I learned to be humble. To treat other people nicely. I learned that, from a social point of view, no matter how lowly statured a person you are talking to, as a person, they are the same human being as you are. You have to respect them. You have to apologize if you inadvertently hurt them. And often you have to go out of your way to be nice to them, because they will not like you simply because of the difference in social structure.

Americans are not sensitive in that regard. I mean, as a whole. The simple truth today is that your economy is built on the global economy. And it’s built on the support, the gratuitous support, of a lot of countries. So why don’t you come over and … I won’t say kowtow [with a laugh], but at least, be nice to the countries that lend you money.

Talk to the Chinese! Talk to the Middle Easterners! And pull your troops back! Take the troops back, demobilize many of the troops, so that you can save some money rather than spending $2 billion every day on them. And then tell your people that you need to save, and come out with a long-term, sustainable financial policy.

Latest Doom and Gloom Commentary on the Financial Meltdown

2008-12-09T19:28:00.001-08:00

There's been lots of doom and gloom commentary. Here's some of the latest I've seen.

Jim Rogers, co-founder of George Soros' hedge fund, comments on the coming trouble with the U.S. dollar.

The interest rate on T-Bills have gone negative. In response to a question posted on Reddit.com about why this happens, someone wrote:

Think of a negative T-bill rate like paying rent to hold your cash. The amount of cash we are talking about is in the billions not Millions. So there is no amount of CD accounts of FDIC insurance in the world to save you if your bank goes bust. Imagine that you have a billion dollars in a large bank vault. The negative T-Bill rate is equivalent to the rent you are paying to keep the monies safe.

Now the bad news…the next bubble will be T-Bills. If you were to look at the T-bill market and turn the graph upside down it would look roughly the same as the Housing bubble which in turn lead to the oil bubble that has now lead to the final place anyone can go the T-Bill market. It’s unsustainable.

In most crisis situations, such as 9/11, the Coupon bond market usually only sees a shift in the region of 5-10%. In this case the bond market is looking at a 20% rush for T-Bills. It’s too much money for too much short term debt.

The current debt load, $20 trillion USD and counting, $10 Trillion of which is being used just to finance all the variations of the bailout plan(s) will eventual catch-up with the Treasury bills everyone is currently enamored with. You might be asking yourself how is the bailout debt load up to $10 Trillion already when Congress only authorized $1 trillion in total Bailout aid? The answer is that Fractional reserve banking will allow that $1 Trillion to quickly balloon to $10 Trillion even without Congress’s approval. All this liquidity is looking for someplace to go. Everyone seems to be running to the T-Bill market. You can see this in both Gold and Oil. All this “flight to Quality” is creating an artificial bubble in the T-Bill market that will eventually reset itself and the U.S. Dollar will plummet. Severely. The “Flight to Quality” has artificially deflated commodities such as Gold and Oil. The artificially strong US Dollar is suppressing both the price of Gold and Oil. The US will be forced to default on its debt obligation and once that happens the T-Bills will be worthless and the US Dollar will reset, so watch Gold and Oil shoot back up again. Even the term “flight to quality” has become an oxymoron in itself, monies flooding into the T-bill market is nothing more then a fundamental misjudgment of the underlying problem. Much like the recent commodities bubble, investors and major money market managers are panicking and looking for anywhere to store what’s left of there funds. If this “crisis” were to take place in any other country the US would be calling for foreign intervention to shore up the market. At $40/barrel Oil is historically way too cheap and at $800/oz gold is half it’s true spot price. Somehow the US market has become an untouchable sacred cow.

T-Bills are just the flavor of the month. Yesterday it was Oil, last week it was CDO’s, the week before that it was Internet stocks, etc. The $10 trillion in fractional reserve liquidity has become the largest deleveraging pool in the world, As a result of all this deleveraging there are artificial perturbations in the foreign exchange markets. The bottom line is most of the “experts” have no idea that this isn’t a financial crises but a fundamental correction in the debt driven consumer market that used to be the “Status Quo” in the US for the past 40 years. To illustrate the fundamental disconnect the experts have on reality look no further then a recent statement by US Treasury Secretary.

"Millions of Americans cannot find affordable financing for their basic credit needs. And credit card rates are climbing, making it more expensive for families to finance everyday purchases. This lack of affordable consumer credit undermines consumer spending; as a result, it weakens our economy" - Hank Paulson, US Treasury Secretary Announcing yet another $800 Billion Bailout Plan.

Americans shouldn’t be using Credit to purchase “everyday” items. Their basic take home pay should be more then enough to cover everyday items. That statement by Mr. Paulson emphasizes the fundamental problem with having 70% of the US GDP going towards consuming and not production. Another underlying problem is who will pay all this debt. The current $20 Trillion in debt represents close to $800 Billion in interest payments a year. That is $60,000 per person. The interest on the debt will move from the third line item of the US Federal Budget to the First. The interest will be twice as large as the entire 2004 Federal Budget for military spending and will represent 80% of the US GDP by 2010.

Once both foreign markets and central banks, around the world, notice that the days of the American Consumer driven market are coming to an end there will be a paradigm shift in market practices which are already slowly taking place. Once the US Dollar is no longer seen as a reserve currency and/or an oil sustained currency then the Dollar will plunge. The fact that the dollar is still the de facto reserve currency and still used in most Oil market transactions is the only reason the US dollar is still floating. The US Dollar is the only currency backed by both Central Bank and Oil market transactions. If one Central Bank form one country wants to pay another Central Bank from another country the transaction is done in US Dollars. If two parties want to buy Oil then that transaction is also done in US Dollars. So the Dollar is a fiat currency backed by billions of dollars made buy millions of transactions. Those two reasons allowed Americans to spend beyond their means for the last years. This and the $1.5 trillion in Federal assets are about the only reason nobody has completely decoupled from the US market. Yet. The US is now in a 20 to 1 Debt ratio. Lehman Brothers was at a 34 to 1 debt ratio when it imploded.

The dollar will plunge for three reasons: (1) there are too many US Dollars in the world market. The market is flooded with US dollars so by definition the US Dollar should be worthless. The debt ratio is too high and the US can’t keep paying back it debt obligations in not only cheaper but depreciated dollars which will start a feedback cycle of higher and higher interest rates. This could lead to hyper-inflation. (2) World markets are calling for a shift in more acceptable reserve currencies and Oil transactions to be conducting in other currencies other then US Dollars. (3) As America’s credit rating is downgraded below ‘AAA’ China will turn inwards and focus on its Domestic market effectively ignoring the US’s call for more monies. Once China diversifies and moves its funds elsewhere there may not even be enough money to finance the current purposed bailout plan.

good luck!!

Another article rails against fiat currencies, or currency that has no intrinsic value, such as being backed by gold, but holds its value by order of a government that makes people accept it by force of law. Of the U.S. dollar, the author writes:

Some, myself included, might say that the dollar has already failed. It has lost over 92% of its value since its initial issuance in 1913. After the revaluation in 1934, the dollar dropped another 41%. In my opinion, it already is toilet paper money, but for the above-mentioned characteristics, which are alarmingly similar to the circumstances that led up to the eventual collapse of the dollar's toilet paper predecessors, I believe that we have seen only the tip of the iceberg of the dollar's inevitable path toward becoming toilet paper money.

Irrational Optimism on Stocks

2008-12-09T11:02:00.000-08:00

In an article titled "Where have all your savings gone?" in this week's Economist, the editors write,

If savers treated financial assets as they do other goods, they would sell them when they are expensive and buy them when they are cheap. Actually, they do the opposite. They piled into the market in 1999-2000, at the peak, and are piling out of it now. They should, of course, have got out in 2000, when the global price-earnings ratio was 35; shares look relatively much more attractive now, since the ratio is down to ten.

I don't think it's a far stretch to claim that people on the whole don't always act rationally and will sometimes blindly follow the bandwagon, so this behavior isn't altogether unexpected. But let's take a minute to break down what this really means.

Let's start with what the 35x price-earning (P-E) ratio means. It means that the equity, or stock, is trading earnings for 35x what the company's accounting earnings are for a given year. For instance, if Alan & Co. had 10 shares that traded at $10 apiece, it would be worth $100. If it earned $20 in 2008, the earnings per share would be $2 (or $20 earnings / 10 shares). This would make the P-E ratio 5 (or $10 share price / $2 earnings per share). Mathematically stated:

P-E Ratio = Equity Value / Annual Earnings

Equity Value = Annual Earnings * P-E Ratio

Of course, the P-E ratio is forward looking, so you would expect a share of stock to be worth more than that company's earnings from a single year. Given the P-E ratio's is forward looking nature, let's take a look at what the P-E ratio suggests about the future earnings of a company. To do this, let's take the perpetuital growth formula. It states that, given earnings that grow at a constant rate, the value of an asset can be determined by a rate of return. Mathematically, this is:

Equity Value = Annual Earnings / [ Equity Rate of Return - Earnings Growth Rate ]

E = Annual Earnings / [ r(e) - g ]

Remember that Equity Value can be stated in terms of P-E ratio:

E = Annual Earnings * P-E Ratio

Thus, setting the two definitions of equity value equal to each other, we can take the following definition of the P-E ratio:

P-E Ratio = 1 / [ r(e) - g ]

Therefore, 35x P-E ratio suggests that the denominator of the asset's rate of return less the growth rate is 2.85%. This realization begs two questions: first, what is the asset's required rate of return, and second, what is its growth rate?

Regarding the first one, the cost of equity, or more exactly stated, the risk adjusted required rate of return for equity, refers to the amount that investors ought to expect to make based on the riskiness of the equity. This figure is derived using the capital asset pricing model, or CAPM. The CAPM states that the required equity return should be equal to the return of a risk-free asset (stated r(f) ), such as U.S. government bonds, plus a compensation for the equity market's risky returns (stated r(m) - r(f) ) that are adjusted to the riskiness of the equity in question (the beta of the equity, or B(e), which describes how the stock's price moves when the market's price moves up or down). Mathematically stated:

r(e) = r(f) + B(e) * [ r(m) - r(f) ]

Given a risk free rate of 5%, a historical market premium of 7% and a Beta of 1, the stock's required return is 12%, which seems pretty reasonable. Asssuming no growth, we get a P-E ratio of 8.3x, or 1 / (12% return rate - 0% growth).

Next, we have to figure out the implied growth rate. At a 35x P-E ratio, we would start with 12% and subtract 2.85% to get an implied growth rate of 9.15%. Less an estimated 3% inflation rate, we have a growth rate of 6.15%, which is quite big, since the perpetuity formula assumes the constant growth rate forever.

To sanity check this, we'll use the Rule of 72, which states that the number of years for a growing quantity to double can be calculated by dividing 72 by the growth rate * 100, or:

Years to Doubling = 72 / ( g *100 )

So applying the Rule of 72 to the 6.15% growth implied by the P-E ratio, we see that the market valuation expected the earnings in the worldwide market to double every 12 years into eternity! (Keep in mind, this is based on my back of the envelope assumptions from above) That's completely ridiculous! Ok, ok ... Amazon and eBay were babies in 2000, so a high P-E ratio may be justified, since everyone expected them to become corporate giants. But remember that the 35x P-E ratio is a worldwide average across ALL companies. What about established companies like GM, Boeing, GE and Wal-Mart that made up the vast majority the Fortune 500 and the global market at that time? These companies contribute greatly to the total worldwide market earnings. Should I really believe that these companies will double their earnings every 12 years? Hmmm ...

The Rule of 72

2008-12-07T22:58:00.000-08:00

Apparently, I wasn't in the know about the Rule of 72 until last year. It came in quite useful during consulting interviews. It's quite a simple, but extremely interesting and powerful rule. It states that the time it takes any number increasing by a steady percentage rate is 0.72 divided by that percent (or multiply the percent by 100). For instance, if the population of Chicago is steadily growing by 7.2%, it will take 10 years for the city's population to double. (72/7.2 = 10 years)

Here's a fun video that features a professor from UC Boulder discussing how he thinks people are really awful at understanding exponents.

Prediction Markets

2008-12-03T21:00:00.000-08:00

This past Monday, my Strategy & Organizations class covered prediction markets, which are essentially like the "ask the audience" lifeline on the TV game show, "Who Wants to Be A Millionare." The idea is that using prediction markets is beneficial because it aggregates the opinions of all of a company's experts to forecast, for instance, monthly sales or the expected project completion date. Traditionally, companies make decisions based on point estimates provided by executives who have vested interests in looking good to the CEO and, thus, tend to report optimistic forecasts (e.g. hockey stick forecasts). Of course, this results in disasterous decision making and huge wastes of money. This brings to mind the regional governors under Maoist China who reported bumper crops during a famine to look good to Chairman Mao at the start of his Great Leap Forward initiative. When Mao visited them, they pooled their grain together and shipped it from village to village ahead of Mao's arrival so that each governor could shine. Rather than offer famine relief aid, the central Chinese government taxed many cities more grain than they actually grew because of their fake optimistic crop reports. In the end, 30 million peasants starved to death.

During the class, Adam Siegel, the founder of Inkling Markets, a prediction markets consulting firm, spoke about his experiences. Of the benefits, he said that prediction markets bring clarity around information, prevent political fudging and backstabbing regarding information. Nobody is the whistleblower for challenging optimistic assumptions, rather, "it's the market."

To encourage people to participate in these markets, Adam said that mixing up the prizes for the winning traders in the markets works well. Offering big prizes encourages some people to become power traders and eliminate chances of winning for casual traders, which then discourages these casual traders from participating. Soft incentives, such as ego stroking, often are more powerful. The trick, he says, is to incentivize the power traders, as well as the casual traders.

Given that many executives and managers want to hide their poor performance, I asked Adam about who typically approaches his firm. He responded that he is usually approached by either third parties who have no P&L responsibility, such as strategic planning groups, or forward thinking managers who are sick of bad forecasts being submitted.

I ain't sayin she's a gold digger ...

2008-11-27T07:24:00.000-08:00

(sorry about the commercial in the video)

(alternatively, click here for YouTube)

Not that my fears were all that valid when I was getting paid peanuts as a financial analyst at an automotive company, but I've always been afraid that I'd mistakenly marry a gold digger since I started listening to rap music at age 14. I'm not sure what creeped me out more: the idea that people are actually so insincere and conniving (outside of antagonists in chick flicks and contestants on "Who Wants to Marry a Multi-Millionaire", of course) or the idea that I may turn out to be such bad a judge of character. Following the recent financial meltdown, my fears have been validated, thankfully not by any sort of marriage of my own, but rather by the marriages of many wealthy investors in London whose wives have revealed their true natures.

Not to be confused with the stay-at-home mother who selflessly devotes herself to the upbringing of her children, with all the housework and domestic chores that entails, the Toxic Wife is the woman who gives up work as soon as she marries, ostensibly to create a stable home environment for any offspring that might come along, but who then employs large numbers of staff to do all the domestic work she promised to undertake, leaving her with little to do all day except shop, lunch and luxuriate.
Having married her wealthy husband with his considerable salary uppermost in her mind, the Toxic Wife simply does not do "for richer, for poorer". Little Dorrit, she ain't.
Indeed, lawyers and financial advisers have reported a 50 per cent increase in the number of divorce inquiries since the financial markets collapsed in September.
There are countless stories of them acting in the most bizarre and inhumane ways. For gold-diggers are materialistic to such an extent that they are emotionally detached from other people.
There's an inability to empathise with another human being. They certainly don't ''do'' conscience. Money, on the other hand, they both love and understand.
Like a frog, the Toxic Wife needs to hop safely on to another lily pad, and a rich one, before leaving her husband. She won't stand on her own two feet. And finding a job is quite beneath her.
''These particular women know how to fake love,'' adds Ambrose. ''They're actually very good at it.''

from Recession: When the money goes, so does the toxic wife, Telegraph (UK), Nov. 26, 2008

Peter Schiff Predicts Downward Spiral

2008-11-25T06:29:00.000-08:00

Peter Schiff, a fund manager who called the current crisis in early 2007, forecasts an even more dire situation in the future. My favorite point of his is that the U.S. needs to "make stuff" to export to pay for its imports.

He also says that the current strength in the dollar is a result of financial institutions selling everything they own and importing their dollars to pay for their margin calls. Once the sell-off ends, the dollar will collapse again. Anyone want to pool their signing bonuses to short the dollar?

Arbitrary Stock Price Movements

2008-11-20T22:06:00.000-08:00

I read this blurb on The Big Picture, a fantastic economics/finance blog, talking about how stocks sometimes tank (or go up) for some random reasons. It's so fascinating to me because I realized this summer that several massive institutional investors (mutual funds, pension funds, insurance funds, etc.) own a tremendous amount of the world's equity and this could potentially happen all of the time.

The Big Picture, "Trading the Big Picture: A Conversation with Barry Ritholtz"

The 50 percent of the action in the stock market on any given day is institutional and something like the top 50 funds are responsible for the lion’s share of that activity. These funds don’t say, “OK, we want to have a position in Microsoft,” and then the next day buy a billion shares of Microsoft. They say, “We’re going to allocate a 3 percent position to Microsoft.” Then they start buying it over the course of a couple of days, weeks and months. And then, beyond that, as money comes in to 401(k)s and it automatically get allocated to these different funds, they do more and more of the same. So they just keep increasing their holdings in this given name as the size of their fund increases. They are buying more and more of the same stock in order to maintain a relative percentage position. And that’s how uptrends are sustained.

Conversely, you have the same thing with selling. When AOL merged with Time Warner, Janus turned out to be the biggest shareholder in each company. They ended up owning some absurd number – 22 percent? – of the new company or some ridiculous percentage like that. So they made a decision, “We want to unwind some of this AOL Time Warner.” They did that not because it was a crappy deal, which is what we had said at the time, but because they just wanted to get rid of some of their exposure. After all, it was ridiculous to own that much of any company. That’s beyond their own internal metrics. What ended up happening was they began selling.

I think their percentage came out to be near a billion shares. And the stock traded 2 or 3 million shares a day. If you want to take a billion-plus position and cut it down to a 200 or 300 million share position, how long does it take for you to sell 750 million shares? Well, if they were 100 percent of the volume, it would take them a year, 250 trading days and 3 million a day. But you can’t even do half the volume, so it took them a long, long time to unwind that position and, of course, the stock just went lower and lower because it had a relentless seller. It was nearly endless supply.

There’s some chaos theory for you: That’s what really drives a lot of the persistency in stock price trends.

All of that is a long way to go to describe why trends are trends, but it just shows you that there’s an actual basis for some of the mathematics behind things, and that there is a real explanations that make sense.

Paying Rent is NOT Throwing Money Away!

2008-11-19T21:20:00.000-08:00

For the past year, I've been arguing with friends who want to buy houses that paying rent is not "throwing money away." It came to mind recently when a good friend bought a house, despite my pleas for him not to do so right now. It kills me because the market consensus is that housing prices have fallen 25% and will fall another 15% (see my Paul Krugman notes), and he doesn't have a fat MBA salary, so losing $15K on the house will really hurt him financially. In case this benefits any of you, here is an e-mail that I sent to another friend whom I successfully convinced not to buy a house prior to the sub-prime meltdown - speaking of which, she should be nice to me and buy me dinner for saving her! This line of thinking also saved me in 2005 - my mother tells me that not buying a condo that year was one of the better decisions I've made in my life (thanks mom!).

---
Personally, I don't buy the "renting is throwing money away." Even in hot housing markets, that logic is debatable.

I believe that a good way to think about "rent" is that you are paying for two things: the right to inhabit a property and the option to leave that property at will. "Options are valuable," is what my finance professor always said in my financial derivatives class. A call option gives you the right, but not the obligation, to buy a stock at a certain price at a certain point in time. Think of renting in this light: with a month-to-month lease, the option you have is "the right, but not the obligation, to move out at the end of any given month (given adherence to certain move-out notification rules)." In practice, it means that signing a one-year lease costs less per month than signing a 6-month or month-to-month lease. If a month-to-month lease is our baseline, let's hypothetically say at $100 per month, and a one-year lease costs $80 per month, your landlord is "paying" you $20 per month to give up your option to move out at will for a 12-month period. But there's even an implicit option price that you're paying at $80 per month for a one-year lease, which allows you to move out. When you buy a house, you altogether forgo the option to easily move out. If you pay $80 per month for your mortgage, you may be paying the same monthly amount as you would for rent on a one-year lease, but you have no option to easily move out, short of selling the property. In the absolute worst case, you may move somewhere for a new job, but not be able to sell your property in your old location before you move out, forcing you to pay for two properties each month (this happened to a friend who transferred from Minneapolis to Detroit), not to mention dealing with the stress of trying to sell the old property ASAP.

Moreover, by believing that you "throw money away" on rent, you are implicitly assuming that the net discounted cash flows (DCF) of buying and, later, selling a property is ALWAYS more positive (or less negative) than that of renting a property for the same period of time. Yes, I know that there are intangible factors involved in owning property ( e.g. how happy it makes you to mow the lawn, paint walls, and clean gutters), but by making the "renting is throwing money away" argument, you're making a purely financial argument. In a hot real estate market, you may make tons of money when you sell your property. But what makes you, an unsophisticated consumer, more able to predict real estate booms and busts than real estate professionals, who themselves can’t predict these things? Additionally, let's consider that, assuming all other property maintenance cash flows are at $0, you need to make at least 6% on the sale to make up for the real estate agent's seller fee. If you buy a $100,000 house, you need to sell it for $106,000 to break even. If you spend $5,000 on maintenance, you need to sell it for $111,000 to break even. And if, hypothetically, your interest rate at your bank is 5% annually, your $111,000 break-even point goes up by 5% (compounding) every year. And that's assuming that developers don't build 5 new gigantic condo complexes next door to your condo complex after you buy yours (this happened to a friend in Minneapolis). Granted, this is very simplistic math for a very complex set of considerations, but this is why I don't believe the "rent is throwing money away" argument.

Personally, I choose not to buy property because I want to stay mobile. The Detroit housing market is tanking, and I derive very little pleasure from mowing the lawn, painting rooms and cleaning gutters. But, that is my decision process and everyone has their own. However, given the housing outlook, I think it may be prudent to wait on buying in the near term. MBA debt is one thing, but I seriously cringe at the idea of losing $20,000 on a house that I “invested” in and having to carry that debt around with me for years.

Hope this helps.

Paul Krugman Speech at Kellogg, 10/27/08

2008-11-19T14:28:00.000-08:00

Paul Krugman came to speak at Kellogg last month. A Japanese friend asked me to send her my notes, since Krugman studied the Japanese recession intensely. It was a fascinating talk – he focused on comparing the current financial meltdown with learnings from the drawn-out Japanese recession of the 1990s. He also had a great discussion of the missing regulation on the “shadow banking system”. Here are my notes if you’re interested. (Blogger doesn't like MS Word formatting unfortunately)

Notes from Paul Krugman talk, 10/27/08

• Striking thing about 1997 Asian financial crisis is that it isn’t uniquely Asian
o It can happen to any country
o It’s now happening in the U.S.
• Background on Asian financial crisis:
o Asian economies praised as wave of the future, then went into crisis
o Crisis ricocheted around the world
o Thai Bhat collapsed in 1997
o Russia defaulted on debt in 1998
o Brazil massive devaluation
o Long Term Capital Management failure in U.S.
• Asian Countries’ reaction led to internet bubble and current mess (1st of 2 causes of housing bubble)
 Asian countries in crisis, their neighbors and China began amassing big war chests of U.S. treasury bills and foreign reserves of rich countries to prevent another run/devaluation on their currency
 Began lending money to rich countries
 Resulted in low interest rates
• Dot-com bubble, popped in 2000, and bailout (2nd of 2 causes of housing bubble)
o Overvaluation of stocks, 40 companies valued as the next Microsoft
o Overinvestment in certain infrastructure, e.g. fiber, that’s still not being used
o Resulted in brief recession
 Stopped by Greenspan lowering interest rates
 Didn’t help, 2 year increase in unemployment despite rate lowering
 Helped prevent Japan-style deflation, BUT
 Created housing bubble w/ low interest rates
• Housing Bubble: caused by low interest rates
o Financial institutions made loans to sub-prime borrowers, b/c housing prices kept increasing
o People convinced that old rules didn’t apply
o Faith in financial innovation creating lower risk
o “Carry trade” – investment scheme to borrow in countries w/ low interest rates (e.g. Japan) and lend to countries w/ high rates (e.g. Russia, Iceland, Brazil)
o “Of the 2 bubbles, the internet bubble is more excusable because there was at least a new technology. Houses have been around for thousands of years.”
• Predictable Outcome to Krugman: 2004-2006, housing prices rise into bubble levels
o Lending becomes reckless during these 3 years – most of sub-prime mortgages issued
o Schilled (Yale), who coined the phrase “irrational exuberance”, refers to bubbles as natural Ponzy schemes:
 nobody engineers them, but everyone makes money
 Until you run out of suckers to pull into the scheme
 Then the bubble deflates
• Predictable Outcome to Krugman: when housing bubble deflates, spending slows, construction boom stops – economy slows
• Outcome Krugman didn’t predict: how huge the financial fallout has been
o 25% fall in real housing prices, he predicts another 15% fall coming
o Wiped out $7 trillion in wealth
o $1 trillion of losses fell onto financial institutions  damaging to the world economy
o Question: how much intentional default is occurring by people w/ mortgages deciding to voluntarily stop repaying their loans b/c they don’t want the devalued houses, vs. people who genuinely can’t afford the mortgage payments (e.g. recently unemployed, medical bills, etc.) ??
 Foreclosure business is very inefficient – banks typically recover $0.50 for every $1 of loans
 Even senior traunches of CDOs default
• Unregulated “Shadow Banking System” creates the crisis
o What made the Great Depression bad was the banking crisis of the early 1930s
o Government now protects against this w/ banking insurance and banking regulations
o BUT – government wasn’t keeping up w/ what banks are: Banks are no longer just depository institutions
 Rise of a new “shadow banking system” or “parallel banking system”
 Banks are now any party that borrows money/shorts and lends it out (e.g. hedge funds, auction rate security institutions)
 Shadow banking system flourished in part b/c they’re unregulated by the same laws – don’t need to open their books to the Fed, no reserve requirements
o A 21st century bank run has occurred over past 1.5 year – runs are getting bigger and bigger
• Credit Crunch
o Many strange non-financial effects, e.g. people in England not being buried in cemeteries b/c of dried up credit lines
o Over past few weeks, long-term U.S. government bond rates increase
 Companies/funds selling off assets to stay liquid – nobody wants to buy many of their assets, so they start selling off US gov’t bonds
 This drives bond prices down, and thus interest rates up
 This is bad for liquidity, so Fed has been working to cut rates
o Spring 2008, speculation that emerging markets would be decoupled from the crisis – now proved wrong
 Many countries are in crisis even though their governments were acting responsibly
• This is due to private sector irresponsibility
 Center of the bad news is moving to developing countries
• E.g. Defaults on condos in Miami are causing Iceland collapse
• Did the Glass-Steagal act cause this?
o No – what caused this crisis is what the politicians didn’t do
o Cause is that nothing has been done to expand the protection of the Great Depression to things that looked like banks:
 Wall Street interests had lobbied heavily against this regulation
 Economists bought into Keynes’ free market fundamentalism (incl Greenspan)
• How are we managing the crisis? Are we unprepared?
o Many economists concerned with the US descending into Japanese-style recession, Bernanke studied Japan at Princeton
o Measures taken by Fed:
 Cut interest rates fast
 Unconventional actions: lend to private sector, free up credit – “change Fed’s balance sheet”
 Respond early – many economists thought Japan could have been saved
 Bernanke did all of this and it didn’t work – the crisis is still spreading
 They started saving banks on a case-by-case basis
 Then stopped, let Lehman fail
• Credit markets froze in response
• Fed decided this was the wrong thing to do
 Then asked US Congress for $700bn, rejected at first b/c the plan was bad
 Current $700bn bailout plan looks small
• Japan’s rescue in 1990s was $500bn = $2.3 trillion in 2008 dollars
• Many new surprises
o Emerging market failures
o September 15, day that Lehman failed  moment when the political race changed, when Obama pulled ahead
 Death of the belief in deregulation, Keynesian style free markets
o Speed of failures increasing
 1982, Latin American currency crisis – 6 weeks between when Mexico failed and when Brazil failed
 2008, 6 hours between crises
 Shadow banking institutions helped cause crises
• Have to pull out investments in various countries to stay afloat

The Value of an MBA

2008-11-17T21:43:00.000-08:00

I wrote this for last month's issue of "The Merger", the Kellogg school paper. It builds on some of my previous thoughts. Hope this adds something new to your internal discussion:

The recent negative press coverage of Kellogg makes this an opportune time to reflect on what each of us hopes to gain out of our 2 years in b-school. In recent years, much cynicism has surrounded the value of the MBA education. An Economist article quipped that b-school is, in essence, a 2 year drunken party. Many think that the proliferation of MBA grads makes the degree less valuable as a differentiator in competing for high paying jobs, a line of thinking that treats b-school as a rubber stamp exercise rather than as a mind-expanding education. While the MBA degree does help people obtain jobs with high salaries, one must not mistaken correlation for causality. The ability to wield the ideas taught in business school allows an MBA grad to, on average, navigate reality more effectively than another who doesn't understand these ideas, which results in a more valuable employee. I truly believe in the value of the education and experience. As such, I’d like to share what I have gained from my time at Kellogg regarding my intellectual and professional growth – which excludes, but does not intend to discount, my social growth – with the hope that you may benefit from hearing my thoughts.

To get the most intellectual gains from the MBA education, I approach my classes as I approach all knowledge: as something that helps me frame, or understand and approach, the world more effectively. How one frames reality has a profound impact on how one proceeds through life; for instance, the U.S. is a political experiment framed around the ideas of Enlightenment-era political philosophers, framing its economic practices around the capitalist ideas of Adam Smith instead of the communist ideas of Karl Marx. Regarding classes themselves, I think about my learning in 3 aspects: the subject matter taught, the skills I gain in learning it, and how the discipline frames the world. These help me gain the skills to create solid arguments given a set of assumptions. Moreover, I expand my own set of assumptions through hearing new ideas and perspectives both in class and discussions with classmates. This ought to help me become better at asking good questions about any subject, regardless of how unfamiliar it is, which I consider the mark of a truly intelligent person, as it requires the ability to think critically and recognize the gaps in one’s own knowledge.

The b-school experience has also helped me grow as a professional in allowing me to improve my communication and management skills, as well as my decisiveness. To improve my communication and public speaking skills, I volunteer for class presentations and treat my comments in class as if I were in an executive meeting. In leading classes for GIM as the curriculum leader and leading Public Speaking Club meetings, I learned to be comfortable in front of large audiences. As a finance tutor to 1st year students, I’m learning to convey complex concepts in clear, simple and concise ways. To make up for my lack of management experience, I’ve taken the opportunity to manage clubs and class groups. Previously, I found management to be daunting because my performance would dependent on the performance of others; now, I’m more comfortable with my ability to lead teams to success. As for being decisive in the face of uncertainty, I now force myself to go beyond analyzing data to drawing conclusions from it. As a financial analyst, I found it difficult to make recommendations based on my analyses in case I was wrong, so I relied on my superiors to make the hard decisions. I’ve now started to view decision making under uncertainty as an optimization exercise, rather than an exercise in finding the “right answer” in a binary world of right and wrong. Comparing the speed of my professional development before Kellogg and at Kellogg, I view the b-school environment as an incubator that has allowed me to hypercharge my professional growth.

However, I recognize that this learning comes at a great cost of time and effort, which I will only exert if I understand the gains. Given my state as a painfully shy 18-year-old who didn’t have the benefit of an academically rigorous high school education or worldly exposure, I now find it easy to appreciate how much I learn from each experience. This is why I put forth the extra effort at my previous job, constantly raising my hand for additional projects and assignments without the promise of extra pay. Likewise, this is why I am a permanent fixture in the QSR and eager to commit my time and full effort to both class work and extracurricular activities.

To prove to cynics, as well as ourselves, that the MBA degree is not a mere rubber stamp exercise, that there is causation, not merely correlation, behind the MBA degree leading to higher salaries, we must constantly remind ourselves of what we hope to gain from our 2 years at Kellogg. Only then can we move beyond valuing classes for the fancy frameworks and esoteric business jargon they teach us, and extracurricular activities for their resume building potential, to treating them as vehicles for true intellectual and professional growth.

Markets are like Football

2008-11-11T15:32:00.001-08:00

I'm doing research for a class paper and came across this snippet:

Markets that arise spontaneously -- street vendors, for instance -- rely almost entirely on informal mechanisms because they're so simple: You look, you choose, you buy, you walk away. But such markets aren't typical of a modern economy, says John McMillan, an economist at Stanford University's business school. He published a book titled "Reinventing the Bazaar" last year that traces what he calls "the natural history of markets."

Consider the history of football. Soccer, rugby and football have their common origins in games of folk football played in England since medieval times, Mr. McMillan writes. "What rules there were had emerged spontaneously: They rested on custom and varied from village to village. Any number of people could play," he says. "There was no referee. . . . Little skill was on display, just muscle." Contests were often violent and bloody. In the 1860s and 1870s, rules were written and the modern games of soccer and rugby were born; American football followed.

"An absolutely free market," he writes, "is like folk football, a free-for-all brawl. A real market is like American football, an ordered brawl."

- "Visible Hands -- A Lesson From the Blackout: Free Markets Also Need Rules; Federal Agencies Attack Flaws In Electricity, Broadband, Online Wine and Others; One Ideal: 'An Ordered Brawl'", David Wessel, Wall Street Journal, Aug 28, 2003

On Cynicism about Business School, or Business Education as a Liberal Art

2008-10-12T11:54:00.000-07:00

In recent years, a lot of cynicism has surrounded b-schools, both from the media and people who have passed through b-school. An Economist article about the topic published a couple years ago quipped that b-school is, in essence, a 2 year drinking party. Another article from a pop-news magazine, of the Businessweek ilk, spoke of the MBA as a hoop that people merely jumped through to get more money, and that as the number of MBA grads grows, the degree increasingly becomes less of a differentiator. Granted, I agree that it is incredibly important to critically think about the value of an MBA and for b-schools to continually question their mission and purpose. However, the simplistic media treatment of this topic objectifies the education and dismisses its profundity. Worse are b-school students who talk about it as a 2-year drunken vacation from work and a rubber stamp exercise. All of the cynicism revolving around the value of business school saddens me because I truly believe in the value of the education and experience, as an incredible intellectual, experiential and social growth exercise. However, I'll limit my discussion to only the intellectual aspects.

On the intellectual front, I treat the business school education as a liberal art. As a business school undergraduate, I felt that learning about how business worked contributed as much to my understanding of the world as studying history and philosophy did. I believe that whoever owns the capital holds the power and, thus, controls the currents of the world. As corporations have come to take the helm of much of the world's capital, learning about how they carry out their plans, compete against each other, and affect the lives of people helps me see through the noise of current events and understand the undercurrent beneath the surface that drove the events.

The b-school curriculum revolves around profound ideas that have shaped the world by reframing how people think - spanning subjects from economics and statistics to psychology and sociology. We often take for-granted the profundity of ideas on reality. How we frame reality is incredibly important. Think about it in terms of a map analogy: if I am trying to get from point A to point B, my instincts may tell me to go east, when the real destination is west. Regardless of how fast or long I run east, I will never get to my real destination. The map and compass are tools that help me see the world for how it really is (or properly frame reality) and get to my destination. As for historical examples, it's easy to forget that the U.S. was founded as a political experiment based on the ideas of European political philosophy up through the Enlightenment. More recently, the Communist Manifesto, written in the late 1800s, has shaped the lives of upwards of 1/3 of the people on the planet. The impact of the ideas taught in business school have had no less of an impact on reality.

While it is true that a lot of drinking does go on at b-schools and that the MBA degree opens the door to many employment opportunities that pay high salaries, let's not mistaken correlation for causality. The understanding of the ideas taught in business school and the ability to weild them allow an MBA grad to, on average, navigate reality more effectively than one who doesn't understand these ideas, which results in a more valuable employee in the workplace. For an outsider to suggest that b-school is an empty experience that leaves you with little more than a rubber stamped degree and a high salary is similar to the mistaken thought behind cargo cults, which are started by primitive tribes who mistakenly worship modern airplanes skeletons as mystical objects whose function results of the power of summoned deities rather than as mechanical objects that operate on physical principles. For a b-school student to treat the education simiarly is much worse - it turns the 2-year intellectual, mind-expanding opportunity into a disgusting waste of time.

The DNA of a CEO

2008-10-08T17:33:00.000-07:00

Last week, I attended a presentation called “the DNA of a CEO”, presented by 3 members of the executive recruiting firm, Russell Reynolds. I thought their observations were quite interesting. They said that, through the firm’s experience, they identified a few characteristics and career experiences of successful CEOs.

Characteristics of successful CEOs (has nothing to do with stylistic differences between CEOs)
Driven
Balance strategic and tactical
Credible (always do what they say they will do)
Leader of people
Execution and performance bias
Pragmatic and realistic

Career experiences:

Progress in well-managed organizations with high caliber people (learn from the best)
Develop functional depth and cross-functional breadth at various points
Think and act like a general manager, regardless of the role (don’t just think about their own role’s perspective, e.g. finance, marketing, but about the holistic view of the business and what it needs to succeed)
Stay close to and know the customer (both internal and external)
Embrace international experiences and exhibit empathy (RR’s clients see this as rapidly increasing in importance)
Live through successes and failures, learn through both (many have a disastrous failure at some point in their careers, which shape them as leaders, “a crucible of leadership”)
Passed the “good person” test over time (on average, but can get really tough when needed)

Boiling the Ocean

2008-06-28T08:48:00.000-07:00

This Friday afternoon, concluding a busy first week of my internship at the Parthenon Group, I narrowly stopped myself from trying to boil the ocean.

The phrase "boiling the ocean" is one commonly thrown around by consultants. It describes an analysis that attempts to take an overly broad or aimless approach to figuring out the answers to key questions asked by the client. During internship recruiting, I had heard the phrase a lot, but it meant little to me. As a financial analyst at Ford, I was always given very specific questions to answer and a defined data set with which to work. I never had to ask any questions or figure out what to do with the answers. In consulting, it's a VERY different story. The client asks broad questions and we provide very specific answers. "Why are our profits declining and what should we do about it?" "Should we acquire/merge with this company?" The skills that consultants develop are how to develop a structured way to approach those problems, breaking them into very defined sub-questions, understand what data is needed to answer those sub-questions, and figuring out how to get that data to drive the analysis forward.

Suffice it to say that on my first real day of work, with one year of b-school and one easy week of Parthenon training behind me, I had no idea how to begin approaching things. Typically, I defined "progress" at work by what I've created: how many spreadsheets I've made, how many pages I've written. The temptation always exists to just begin cranking out spreadsheets, gathering information, etc. But when you have no clear path set for you by someone else, you can easily waste time by going down the wrong path. By aiming your efforts eastward and running east when the goal is actually southwest, you can easily mistaken distance traveled for progress.

In the end, I take solace in what a partner said during our training. "This is an apprenticeship business." You learn how to do it only by doing it. Not that it reduces my anxiety about doing a bad job this summer, but it at least gives me comfort when I feel like I'm wandering in the dark with arms outstretched.

How Did We Get Here?

2008-05-11T23:54:00.000-07:00

In the midst of the sub-prime blow-up, people are pointing fingers at a lot of places. I don't doubt that the banking industry and the Fed are culpable, but we can't absolve individuals who make such decisions to speculate on real estate or live beyond their means of their responsibility in creating this mess. A comedian's commentary about the difference between dogs and cats that I heard years ago reminds me of how I feel people act. When a cat-owner goes on vacation, he can leave a week's worth of food for the cat and it will eat it slowly throughout the week. However, if a dog owner did the same thing, the dog would eat it all at once and lie on its back groaning about how much it ate. People, in my view, act like the dog: so many people just keep consuming with no regard for when to show temperance or regard for staying within their means. This LendingTree commercial, which aired a few years ago, sums up a troubling mentality. I never found it funny, only scary. Whoever laughed at it then probably isn't laughing now.

Taking on more debt to temporarily alleviate your already crushing debt-load? Who can claim that the idea anything but absolutely brilliant.

Spring Break in Asia!

2008-05-11T08:44:00.000-07:00

Shanghai Pudong District Skyline

view from the Pearl Tower

One Thursday night near the end of March, I stood in a shoulder-to-shoulder packed, smoke-filled room in Shanghai, at the best club I've ever been to, called "Babyface." The energy in the club was incredible; it felt reflective of that of China as a whole, with its breakneck-pace development and optimism for the future. For my spring break this year, I traveled to Shanghai, Beijing and Seoul as part of a Kellogg program called Global Initiatives in Management, or more affectionately, "GIM." The GIM program is a completely student-planned program, consist of a 1-quarter course developed (I developed the curriculum for my course, GIM China-Korea), followed by a 2-week spring break trip to the countries of study to meet with business leaders, tour the country and have a great time.

The program, which started almost 20 years ago with a trip to Soviet Russia, is one of the quintessential parts of the Kellogg experience. Nearly 1/3 of the first year students participate in the program, studying countries/regions such as China, India, Tanzania, South Africa, South America, Southeast Asia, Russia and Europe. The trip provides an incredible chance to learn about and experience the country first-hand, providing an international element to the Kellogg experience.

My experience in China and Korea really reinvigorated my fascination with East Asia. Even though I had been to Shanghai and Beijing previously, I didn't experience the cities to their fullest. Nor had I thought too seriously about doing business there. I've come away with a renewed desire to improve my Mandarin and to gain more exposure to China. We'll see what opportunities I have in the future.

Our group meeting w/ S. Korea President, M.B. Lee
Seoul, S. Korea

The Soul-Crushing Experience of Summer Internship Recruiting

2008-02-28T05:25:00.000-08:00

I'm blogging from my room in the Ritz Carleton in Boston Commons. Why am I, a broke MBA student, staying here, you ask? I'm attending the Parthenon Group sell weekend for its summer internship program. As part of the sell, they put us up in this hotel. The hotel is absolutely incredible! The shower is truly therapeutic, the bed is incredibly soft and the entire room is beautifully decorated. It's a nice reward after a difficult recruiting season.

During the silence between my last blog post and now, I have gone through the summer internship recruiting process. In my first months at Kellogg, I thought to myself, "I wonder what recruiting season will be like?" My cynical side predicted that we would stop giving each other group hugs and the gloves would come off. The rest of me hoped otherwise. In the end, I found that my classmates maintained a very collegial environment during recruiting season, but at the same time, everyone has to look out for their own interests at some point.

As one of the lucky 45%, I received an internship offer through the on-campus recruiting process. The other 55% of my classmates receive their internships through an off-campus process, either because their dream companies don't come on-campus to recruit or they were not as lucky as their peers during the on-campus interview process. The competition is very stiff, because all of my classmates at Kellogg are extremely smart, talented and accomplished. The worst case is people who put a lot of time into the on-campus process and then have to go off-campus b/c they don't get an offer from any on-campus companies. I've heard some strange stories. My friend, a former PE/M&A lawyer trained at Harvard Law who is extremely nice and absolutely brilliant, can't find a brand management internship with a consumer packaged goods company; my guess is that they don't want to take risks on people who don't fit their cookie cutter mold of having former brand management or marketing experience.

A friend of mine described the recruiting process to be "a soul crushing experience." Not many of us have experienced as much rejection in our lives. Having recruiters calling you every day and telling you "No!" is brutal. With each ding, I questioned more and more whether I was employable. At Kellogg, we have something called "the Atrium Effect", which is when people who sit in our Atrium cafeteria area overhear all sorts of conversations about, "So and so got into McKinsey / BCG / Goldman / Morgan / Google / etc." and start freaking out about their own employability/worth as a human being. It gets bad at different times of the year, but begins to soar during recruiting season. People try to avoid the Atrium, and to some extent, the Jacobs Center in general, during recruiting season b/c it can feel SO tense. Actually, the worst area to be in is the Career Management Center's interview waiting room. The silence is stifling and seeing beyond the forced smiles on everyone's faces after the first full month of recruiting is really heartbreaking. The stifled conversations that we had in the waiting area did little to alleviate tension prior to interviews, but rather highlighted the awkwardness and anticipation that we felt.

Standing above it all, employability has nothing to do with whether you do well during the internship recruiting. If you have gotten into a top b-school, there's no question that you're a solid employee. But, it's hard to see this when you're in the thick of recruiting.

During the consulting recruiting process, I couldn't focus on schoolwork, which is terrible considering that recruiting started around midterms time. Had I not seen a lot of this stuff during undergrad, I don't know how I would have managed. Hats off to my classmates who never studied this stuff before and had to take the finals under tremendous stress.

Anyway, I need to check out of the Ritz in 30 minutes if I want to make the hotel's 12:00pm check-out time, so I need to start packing. It's a tough life.

Kellogg Annual Ski Trip, Part 3

2007-12-26T15:25:00.000-08:00

For the last few days of the ski trip, I went ice climbing and attended the Kellogg 80's Party on the final night. I only ended up snowboarding for 2 days, because four of my friends and countless other Kellogg classmates got injured on the slopes, so I decided that it just wasn't worth it.

Although I haven't been climbing in 2 years, I jumped on the opportunity to go ice climbing when my buddy Enoch brought it up. On the day before the ice climbing expedition, he hurt his shoulder so he couldn't go. I felt terrible for him, since he's a true mountain man and has been wanting to do this for a long time. 4 of us ended up going on the guided climbing trip on the outskirts of Telluride. The hike was a bit arduous while wearing crampons and carrying climbing gear. But when we got to the site, the views at the frozen waterfall area were amazing. Our guides quickly taught us how to climb and set up the belays and we were off. Smashing ice with the ice axes and crampons made me feel pretty badass, and it took some getting used to in order to fully trust that digging only 1/4 inch of the ice axes or crampons into the ice was enough to hold yourself up. Though absolutely exhausting, I loved it.

Ice axes ready:
(from the front, T., me, K., J.)

Frozen waterfalls:

The 80's Party on the last night was also a blast. Everyone had their best 80's gear on. I saw everything from short shorts on guys to leg warmers on girls. After that night, I resolved to not drink heavily in front of my classmates. I'll leave it at that. 2 great bands played at the party: Kellogg's very own Rocket Pockets and some 80's cover band from L.A. that everyone loved on last year's ski trip.

How the can 80's make a comeback if it never left?
(K., me, and K.)

My buddy S. rocking on stage in leather pants:

And so ends the week-long party known as the Kellogg annual ski trip. Soon after our buzzes wore off from the 80's party, we were back to worrying about our flights home being delayed, internship recruiting, and everything else mundane in real life ... that is, until next December.

Kellogg Annual Ski Trip, Part 2

2007-12-18T09:45:00.000-08:00

We're now two and a half days into the ski trip and it has been phenomenal so far.

During the daytime for the past 2 days, I've gone snowboarding, which has been a painful experience. I'm a novice. Falling every 20 or 30 feet and whenever I get off of the ski lift is only fun for so long. And in spite of having pads and wrist guards, I still jar my head whenever I fall. So, I'm giving up on boarding today. But being out in the snow is great. However, according to my classmates who are more talented in snow sports, the black diamond routes that start at the very top of the mountain are amazingly scenic.

Riding the seemingly eternal ski lift, preparing to meet my maker:

At night, everyone comes out to party. The ski lifts close around 4pm and our corporate sponsors have after-ski parties in various bars around town. We meet up with friends to eat dinner and relax before the nighttime parties. On the first night, we had a golf themed bar crawl. If anything, I've learned that bar crawls are a terrible idea when it's painfully cold outside. Last night, we had a heaven and hell themed party at the town convention center. It's pretty difficult to accommodate 700 people, so the convention center is the only place that we're able to have these massive shindigs. The party was amazing, as was the open bar full of top shelf liquor. While I only had fuzzy devil horns, it was great to see how creative everyone else's costumes were.

Chilling with the cutest little devils around:
(B., J., S., me, and K.)

And I can't forget, Naughty by Nature came to perform for us! Never in my life did I expect that I would be just feet from Naughty by Nature at one of their live performances! My stars! However, it was pretty awkward when they gave a shout-out to the future business leaders at the Kellogg School of Management. In any case, their performance was great fun.

Who down with O.P.P.?

I'm taking today off of snowboarding to check out the town of Telluride. Soon, I hope to get acclimated to the high altitude so I don't spiral into near-heart attack hyperventilation mode when I climb a flight of stairs. More later.

Kellogg Annual Ski Trip, Part 1

2007-12-16T18:12:00.000-08:00

Following final exams, about 700 of us Kellogg students have departed for the annual Kellogg ski trip, which is in Telluride, CO this year. This is THE Kellogg social event of the year. After working so hard on finals and recruiting, everyone gets together to cut loose and really enjoy each other company. Being around my classmates in Evanston is nice, but with recruiting and schoolwork on my mind, I can't fully appreciate their company. Now, we're all in an amazingly beautiful part of Colorado with nothing else to think about except skiing, snowboarding, who to eat dinner with, and what bar the Kellogg social event is at that night. Especially hilarious is the fact that we're taking up 700 out of the 900 beds in the Mountain Village area of Telluride. We're essentially taking over the town.

Some of the highlights are the costume parties at night. There's the golf party (bleh), the Heaven & Hell party (better), and the 80s costume party (hooray!). We're also getting Naughty by Nature to play at our party one night. I'm sure that they're available for birthday parties and bar mitzvahs as well.

I'm staying with some people who I don't know that well but are really chill. It'll be a great chance to know them better. Anyway, here are some pictures:

View from our condo:

Our living room:

"Everyone has a plan until they get hit"

2007-12-13T09:33:00.000-08:00

I'm about to go into my last final exam of my first quarter. I can't study any more without my head exploding, so I'm blogging. For my Strategy final exam, my professor distributed a Wall St. Journal article where I found a quote from (surprisingly) Mike Tyson, former heavyweight boxing champion, that I found extremely profound and succinct:

"Everyone has a plan until they get hit."

Planning for the future is important, but what happens when some unforeseen event happens that throws a monkey wrench in your plans? How do you react when things spiral out of control? The imagery of a boxer that this quote evokes is very poignant and beautiful to me. Getting up out of his corner, the boxer touches gloves with his opponent and focuses on the strategy that he and his trainer discussed for weeks as the bell rings to start the match. They dance around the ring for a bit, throwing a few quick, opportunistic jabs, but nothing substantial. Then, catching him off guard, his opponent lands the first punch against him, jarring his head. He stumbles back a step, but quickly tries to steady himself, catch his breath and regroup, as his opponent charges forward. There are few things more brutal than getting hit by a boxer. When you're reeling and everything starts coming at you quickly, your plan goes right out the window. What then?

Team Work and Market Value

2007-12-12T07:33:00.001-08:00

Many successful people talk about the importance of building your own brand in your workplace. Recently, I've been thinking about how this concept applies to b-school. At Kellogg, where teamwork determines a huge portion of your grade, it's incredibly important to have strong teams. During our core classes, our groups are created by our professors, so you hear the full range of stories from phenomenal groups to groups where everyone hates each other. In our non-core classes, we choose our own groups. That's where your market value comes into play.

To get solid people to want to work with you in teams, you have to raise your market value. From my observations, there are 2 ways to do this: first, through word of mouth recommendations, which happen when you perform well in your groups and make solid contributions, and, second, by making smart comments in class discussions. Borrowing terms of communication theory, it's hard to discern signal from noise. The first method provides a strong signal, but is subject to biases and the reality that people aren't good at everything. Someone who performs strong in Finance classes may perform poorly in Marketing, and vice versa. That said, demonstrated effort and the ability to keep teams on track are valuable, regardless of subject matter expertise. The second method aims to send a signal to your classmates who haven't worked with you or don't know people with whom you have worked in groups, but is subject to more noise, because some people are really articulate but aren't willing to work hard. While it seems very contrived, I've been more cognizant to try to make smart comments in classes that give no points for class participation. (Update 4/26/09: My friend at HBS told me that his professor commented, "When you make comments in class, your goal isn't to try to impress me. I've seen all sorts of really smart students in class, so I really don't get impressed. Your goal should be to impress your classmates, so that they'll take your calls 5 or 10 years from now when you're trying to get your start-up going.")

I've found it fascinating to think about how market values have shaken out over the first quarter. The topic of who is good to work with and who isn't has suddenly become of great interest to everyone. As one of my 2nd year friends put it, "Sometimes, your good friends aren't the people that you want to work with in class."

I can only hope that my market value is as high as I've worked to make it.

Thoughts on the 1st Quarter and Opportunity Cost

2007-12-12T07:11:00.001-08:00

As final exam week winds down, I realize that I've been woefully delinquent on blogging. MBA time is a strange thing. Each day feels like it lasts for a week, because of how full the days are with class, recruiting and socializing. But, in retrospect, each month feels like it slips by so quickly and unnoticeably. Now, I stand at the end of my first quarter, 1/6 of the way through my MBA education.

My tactic for the first semester has been one of building up my resume and myself for recruiting season, on the advice of my former colleague who has gone to b-school. According to him, your grades during first quarter matter the most, because they determine what doors are open to you for your summer internship recruiting. Perhaps to an unbalanced degree, I've forgone many nights of partying and socializing in favor of studying. Near the end of my 2-week period of sleeping 4 hours a night, I pulled 2 all-nighters and sold my Fall formal ticket for a $20 loss to work on 2 major assignments. I'm more familiar with the Jacobs Center janitorial staff's midnight cleaning routines than anyone else in my class. With 3 final exams done and 1 to go tomorrow, I'm anxiously awaiting my grades to see whether all of my efforts have indeed paid off. Professors normally give between 30% to 40% A's, but I realized in Wharton undergrad that nothing comes free or easy.

One thing that I learned quickly is that time is a precious commodity. Everything has an opportunity cost. Unfortunately, I'm only as close to my classmates as you can get by casually chatting in passing after class. On the bright side, I am developing an inner circle of friends, albeit a small one. With recruiting, I've gone to all of the consulting firm presentations and sent the obligatory thank you e-mails, but have not had a chance to really network after the events. We shall see how far this approach gets me. BCG plans to interview 140 students this year, with 70 closed list spots and 70 open list spots. McKinsey interviews about 20% of the class, from what I hear.

As someone who is troubled by uncertainty, I'm very anxious to see the outcome of all of my efforts. Time passes so slowly in these situations. Keep your fingers crossed for me!

12/12/2006, Clarification: Closed list are interview spots given by invitation, open list are interview spots that students bid for using their interview bidding points. Most companies don't differentiate between interviewees with open and closed list spots during interviews. Given the limited number of bid points that students have, it is desirable to get on the closed list when possible.

Over-commitment

2007-11-03T19:45:00.001-07:00

If you don't count my 3.5 hours of sleep and my 3.5 hours of eating breaks, I have been working for 30 straight hours. This is what happens when you over-commit to various activities. Regardless of how many times my second year friends cautioned me not to do it, I couldn't help myself but to sign up for every activity that seemed remotely interesting. Actually, that's a bit of an exaggeration. In any case, my overeagerness got the best of me, even after many warnings from those wiser than me. And that's why I sold my fall formal ticket this afternoon and sitting here for my 30th straight hour of work.

The urge to over-commit is strong and the consequences of doing so are not immediately obvious. But when all of your activities' deadlines, assignment due dates and midterm exams all fall within the span of a few days, things can get pretty hectic. And by hectic, I mean obscenely busy. For the uninitiated or aspiring b-school student, an example may help to drive the point home.

Picture, if you will, a happy yet over-eager man. One day, he goes to the circus. At the circus, the ringmaster calls for volunteers to be human targets for the knife thrower. Being up for anything, the happy yet over-eager man raises his hand and is chosen. "Boy," he exclaims, "this is going to be so much fun! What could be the worst that happens?" He saunters into the ring and allows the knife thrower's beautiful assistants to strap him onto the circular knife target. All the while, the assistants tell him that he's so courageous and brave for volunteering! However, when the knife thrower prepares to throw the first knife, a thunderstorm unexpectedly rolls in unnoticed. Unfortunately for Mr. Happy Yet Over-Eager, the first crack of thunder coincides with the knife thrower's release, causing him to misthrow. Before the knife reaches our protagonist, a second streak of lightning strikes him. On top of that, a yet undiscovered magma vent opens up beneath the knife target, to which the happy yet over-eager man is strapped! Oh no! Tragedy! Thus, our protagonist meets his unfortunate demise.

Midterm Madness

2007-10-25T16:24:00.000-07:00

Being too busy to notice, I've let nearly two months of b-school slip by me. As my midterms wind down, I'm reeling from sleep deprivation, lack of exercise and living in a complete sty of an apartment. For the past three weeks, I've been sleeping amidst my clean clothes, having just enough time to do laundry, but not quite enough time to put it away. That said, the past two months have been great.

As the "McGinnis's Two FOs framework" would suggest, I've been suffering from FOMO, inducing me to completely over-commit. I signed up to lead a Global Immersions in Management (GIM) trip to China and Korea, competed in several competitions (Chicago GSB IPO Competition, Annual Kellogg Marketing Competition, AT Kearney Case Competition), and decided to not sacrifice academic performance (wishful thinking). As luck would have it, everything came due all at once. This past weekend, I had to tend to my GIM curriculum proposal, AT Kearney Case Competition write-up, Leadership in Organizations final group paper, Marketing Group Midterm Case, Kellogg Marketing Competition Segmentation Analysis, and midterm studying for Decision Sciences and Strategic Management classes. As such, I slept for a total of 7 hours over the past weekend and worked for 26+ hours over two days, breaking only to attend Special K, the comedy show put on by my incredibly talented classmates.

While I'm enjoying b-school, the intensity is grinding me down. After this coming Monday, my first wave of midterms will be over. I'm looking forward to taking some time to reflect on what I've been doing, and gather my thoughts and re-balance myself. Then, I'd like to take some time to get to know some of my classmates better, as I've been completely anti-social for the past 3 weeks. My Finance Director at Ford said something really profound to me before I left, "Personal growth happens when you become comfortable with the uncomfortable." I've been very uncomfortable for the past 2 months and I'm starting to feel a little more comfortable now. Hopefully, that's a good sign.

But, alas, time for reflection is short. I won't have but a few hours to think before I have to tend to Winter Quarter class bidding and upcoming assignments! But, such is b-school life.

Social Theory at HBS: McGinnis' Two FOs

2007-10-03T22:56:00.000-07:00

A friend of mine e-mail this article to me. SO true of the MBA social scene.

By: Patrick McGinnis (OG), Contributing Writer

Posted: 5/10/04

Maslow has his hierarchy of needs. Porter has his five forces. Shah has his three Rs.

Lots of people have created helpful frameworks that allow HBS students to distill entire career's worth of work in a single catchphrase. While I prepare to graduate, I have been ruminating on a single subject for hours at a time. What sort of topic could require the singularity of focus of which I write? Human rights? The plight of the Sierra Leone? The Swan? No. I'm focusing my remaining time at HBS trying to understand the social structure in which we have lived for the past two years.....and I think I've figured it out.

Like any good framework, my approach to this problem came much like my efforts to glean insights from a case: Preparation, discussion, and, most importantly, very thoughtful post-discussion reflection. I developed Part 1 of my social theory late last year as I realized that most e-vites sent around school garnered response rates of less than 50%. That's a pretty paltry showing for a population of overachievers. Why would so few people respond to an invitation for a birthday party at Trio, especially when it's been sent to 350 close friends? The answer is simple. It all comes down to what I'll call McGinnis' Two FOs: FOMO and FOBO. Allow me to explain.

First year, especially first semester can be a trying time socially. In this state of social flux, FOMO, or Fear Of Missing Out, weighs heavily on the psyche. Why else would a person routinely schedule nights that look like this:

5:00-6:50 - Sherry tasting with the WCS in the Williams Room

7:05-7:40 - NYC Admit Cocktail Party Reunion Drinks at Redline

7:50-9:00 - Small group dinner at Border Café

9:00-9:40 - Drop by at Finale to see the tee totaling Midwestern couple in your section

9:50-11:10 - Grafton with inner circle

11:13-12:30 - Kong with inner circle plus second tier

12:40-12:55 - Tommy's with inner circle plus second tier plus random undergrads picked up at Kong

1:05-2:30 - After-party in SFP at Euro girl's apartment - gouda cheese eaten

2:30-3:12 - Drunken emails: "Sorry I missed your 80's theme party at Felt - you know that you are totally in my top 15"

On my rough calculation, in one night, a person who suffers from deep FOMO sees as many as 70-80 people (note, this calculation gives partial credit for waves, but full credit for small talk).

Given the incredible stamina needed to sustain a FOMO lifestyle, many HBS students seek to impose order on their lives and instead seek to commit to single activities with fixed groups of people. While this decision looks healthy on the surface, there are risks with this approach to life as well. I call this complication FOBO. FOBO, or Fear Of a Better Option, drives us in the other direction from FOMO. Consider the sad case of a person I'll call Aldrich Spangler.

Aldrich Spangler: FOMO and FOBO in Action
On Monday morning, Aldrich foolishly accepts a just-sent invitation for a Thursday night Crimson Greetings Reunion at Redline. As he presses send, he thinks to himself, in classic FOMO style, "Phew, now I'm set for Thursday night." In fact, he circulates an e-mail back to the group saying, "I'll be there....crimson greetings = good times!" Then disaster strikes.

Wednesday night he gets an email from his buddy Cumnock Hawes, inviting him to a Sox game followed by a three-host birthday party at Noir. Let's face it, a mistake has been made. Who would pass up the Sox/Trio combo for Redline? Still, Aldrich sacrifices the game in favor of Crimson Greetings because he doesn't want people to think he's outgrown his humble card salesman roots. The end result? The next time Aldrich responds to an email from the Crimson Greetings group he writes: "Hmmm, that sounds nice. I will definitely try to make unless I'm out of town...I'll keep you posted." Notice the change in tone and the expert use of "..." to imply interest yet avoid commitment? FOMO, meet FOBO.

Now that I've defined both FOMO and FOBO, I'd like to discuss their complicated relationship. FOMO and FOBO are irreconcilably opposing forces, the antithesis of yin and yang, and can drive a person towards a paralytic state I'll call FODA, or Fear Of Doing Anything. We've all seen the effects of FODA on certain classmates over the last two years. I tend to think of one RC victim, Morgan Kresge, who made a huge splash in Foundations, hitting every event. Although she embraced a FOMO existence, she always maintained an escape clause on any social event due to a severe case of FOBO. After a few months, however, Morgan shunned all group activities, started going to yoga several days a week at Shad, and avoided the Spangler catwalk at all costs. Last I heard of her, she was taking all of her classes at the Ed School. She'd gotten totally FODA'd up.

These examples, combined with a little bit of analytical thinking, have allowed me to come up with a framework that crystallizes my theory. Notice that as a person becomes more and more FOMO, the energy needed to maintain such an active social life is tremendous. On the other extreme, practicing aggressive FOBO will only serve to alienate your friends. Poor management of the trade-off's between the two forces leads to FODA.

Interestingly, although I hope McGinnis' Two FOs will be seen by some of you as groundbreaking, I've seen these two terms break into EC parlance over the last several weeks. Just today, I observed the following e-mail exchange evolve regarding post-graduation travel plans:

PT: "What's the latest on summer travel plans?"

TC: "Don't know. McGinnis and I are definitely going. Are you guys in or out? Say no to FOMO and FOBO"

SS: "I think I'm out for now..."

PT: "I'm in, its just a matter of dates and exact itinerary given the dates. I'm figuring it out next week. If you and Pginnis have an itinerary or rough dates, can you send them over? Thanks. Non-committal SS is Mr. FOBO."

I hope that in your remaining weeks at HBS you will consider employing the McGinnis' Two FOs framework. I know I will. Partly to try and gain momentum for some hard work that I believe could change social theory as we know it. Partly to overcome my FOWA, Fear Of Working Again.

Distinguished Speaker Series

2007-09-27T21:40:00.000-07:00

Transformation comes in many different forms, and one of which is to listen and to learn from wise ones that have experienced life. I am blessed to be at a place where wise, experienced speakers come and so readily share their thoughts and advice with us. This week, I've already attended 4 sessions with leaders from all different backgrounds. Below are my notes, observations, and knowledge that I gained from each speaker.

09-24-07 Ed Ruggero (bio): Thinkers, Leaders, Heroes, Visionaries.
With a military background, Ed spoke volumes about leadership in critical situations.

- Army leaders lead during times of combat, chaos, and violence. Successful leaders need to be able to lead during times of extreme stress.
- "Inspire Leadership" gets other people doing what you want to do, because they WANT to do it. "Exchange Leadership" gets other people doing what you want to do, in return for something.

Leaders
- Seek to instill "confidence" and "haste."
- Recognize. He needs to understand his subordinates' hardships AND THEN comment on it. He pays a compliment "deliberately," not just saying "Good Job."
- Reach and find out what motivates the team.
- Are last on the chow line, but first to jump off the plane.
- Is always ON and visible. He's always out there, providing a figure for others to look upon. He is front and center.
- Push decision levels down. A simple "What are you going to do about it sergeant?" will keep his people on the ball and always prepared.
- Do not fall back behind his troops. He is out there with his troop, and that builds trust.
- Constantly communicates the mission, in plain-English. "Here is the plan, and your role in it, and how it connects to the end result" so that they will know what to do even if the commander is not present.
- Have a clear picture of the ultimate goal of the mission in mind.
- Give time for junior leaders to pass on orders to the privates.
- Convey a crystal clear vision, from top to bottom.

09-24-07 Bob McDonald, COO of Procter & Gamble: Value Based Leadership.
An awesome write up by my section mate here.

Welcome to Kellogg!

2007-09-27T18:08:00.001-07:00

Despite my best intentions and well-laid plans, I have not blogged since I left Michigan for Evanston. But, with good reason! This past month and a half has been an absolute blur! The executive summary of my past month and a half is as follows:

Drive down to Evanston with Samir
Unpack apartment
Go on KWEST to Iceland for one week (KWEST = Kellogg Worldwide Experiences and Service Trip), hiked 35 miles uphill, partied in Reykjavik
Orientation Week, aka CIM (Complete Immersion in Management), made cheers, skits and participated in CIM Olympics (hurray for dizzybat!)
"Leadership in Organizations" Pre-Term Class for 2 weeks, learned how to use cognitive biases to our advantage in meetings
Started class this past Monday (it seriously feels like I've been in class for 2 weeks)

(I'll make separate posts about everything later on.)

The past month and a half has been both exciting and nerve-wracking, spectacular and overwhelming. In the first conversation I had with another 1st Year student at Kellogg, we discussed how we thought the whole school felt cult-like. The students that we met during Welcome Weekend gushed about how much they loved the school. Everyone, it seemed, had drank the Kool-Aid and been affected. But, during the following week, as I shivered through the hills of Iceland with 25 other Kellogg students, I began to warm to the idea of the "Kellogg Culture". For seven long days and nights, we bonded over hiking boot sores, protein deprivation and loud snoring.

However, upon returning to Evanston, I once again felt out of place. To begin CIM Week, we were thrown into our 70 to 100 person sections. First, I met my 70 Jive Turkey section mates all at once. Then, I met all 700 of my classmates in various social outings and orientation events. Since I've always formed tight circles of friends throughout my life, having all sorts of unfamiliar people around me put me pretty far outside of my comfort zone. But, after being together for so long, we quickly bonded and became friends. It sounds corny, I know. But, being around people for extended periods and having all sorts of ridiculous shared experiences really allows you to build bonds.

Thus, in a month's time, the oft-mentioned "Kellogg Culture" has gone from something fuzzy and ambiguous to a welcome fact of everyday life. I've learned a lot and have been humbled repeatedly since arriving here. People make flash judgments all of the time, and to a large degree it's necessary for our survival, but I've learned to start reserving my judgment. Someone who I don't hit it off with immediately may be more interesting than I ever imagined. Entering Kellogg, I believed that spending inordinate amounts of time together is an incredibly superficial way to build bonds. However, I've come to realize that bonds built over time give people the opportunity to understand each other more deeply than they would otherwise.

It's funny how things work out. My first visit to Kellogg in Fall 2006 came on an overcast day. Paul and I saw nothing but grey: the cement buildings, endless field of clouds and murky lake all blended together to create a stunningly depressing effect. Kellogg's home building, the Jacobs Center, came as a shocking contrast to Wharton's beautiful, brand new home, Huntsman Hall. I thought to myself, "I don't ever want to come here." Upon receiving my admissions decisions from all of the b-schools, I was slightly dismayed that Kellogg was the only top school that accepted me outright. But, now I feel like I fit better here than I would ever fit at any other school that I applied to.

Jumping the starting line

2007-09-03T21:15:00.000-07:00

WOW. I now understand what people mean when they say that first year of business school is a whirlwind, and that time pass by fast. I took a red-eye flight from LAX and arrived in Boston on Saturday morning, and I have been doing things non-stop. Aside from unpacking, which I am still doing right now, I have met so many people. HBS is really active about setting up events for all the 900 1st year students to mix and mingle, and I have been taking advantage of this to meet some old friends, some friends that I met during the admit weekend, and many new friends. Tomorrow will be the first day where all of the students meet for the Dean's welcome, and then a whole day of Learning Team activities. I am definitely looking forward to meeting my team, and I will post pictures of my dorm room soon.

Arete!

2007-08-09T10:02:00.000-07:00

Since leaving work, I've spent a lot of my free time working down my reading list. In the European history book that I'm currently reading, I came across a funeral oration made by the ancient Greek leader, Pericles, that I found incredibly inspiring. Pericles was the leader of ancient Athens during the Peloponnesian Wars, an immensely destructive series of wars in which Sparta and its allies in the Delian League defeated and sacked Athens. The funeral oration is set in the midst of the war, during a mass funeral that is held for the Athenians who had lost their lives in the conflict. After honoring the dead, Pericles sings the virtues of his fellow Athenians, eloquently discussing the values that set them apart from the rest of the Greeks and barbarians:

We cultivate refinement without extravagance and knowledge without effeminacy; wealth we employ more for use than for show, and place the real disgrace of poverty not in owning to the fact but in declining the struggle against it ... instead of looking on discussion as a stumbling-block in the way of action, we think it an indispensable preliminary to any wise action at all. Again, in our enterprises we present the singular spectacle of daring and deliberation, each carried to its highest point, and both united in the same persons ... But the palm of courage will surely be adjudged most justly to those, who best know the difference between hardship and pleasure and yet are never tempted to shrink from danger.

- excerpt from Pericles' Funeral Oration in Athens
- Book 2, Section 50, "History of The Peloponnesian Wars", by Thucydides
- text taken from Tufts University's Perseus Digital Library

While it's not directly related to business, I'm sharing this because I believe that our characters and personalities are still very mutable. From what many MBA grads have told me, going to b-school has not only been a professional endeavor, but an unexpected process of self discovery, as well. Your actions at every moment both articulate and shape your personality. Without proper introspection, say several Ford managers whom I respect, you can't overcome your own shortcomings and improve yourself. I often ask myself who I am today and who I want to be tomorrow. These words that Pericles spoke over 2,300 years ago provide me with good guideposts.

P.S. Arete is the Greek word meaning "excellence", "goodness" or "virtue", used by the ancient Greeks to convey the idea of "living up to one's potential".

Experts are Made, Not Born

2007-08-04T15:53:00.001-07:00

Today, I read an article in the July/August 2007 issue of the Harvard Business Review titled "The Making of an Expert" that struck a chord with me. The author discusses how experts and champions are made through deliberate practice, coaching and solid discipline. Having been raised by Chinese American parents who immigrated to the U.S. as grad students, I'm well aware of Chinese attitudes that good students become so by studying hard. However, I am both fascinated and encouraged by how this article validates this idea and expands it into different realms beyond academics. I'm not sure what implications this has on the entire nature versus nurture debate, but I won't touch on it in this post, since I'm primarily concerned with how it relates to developing skills and how to approach the MBA education.

One thing emerges very clearly from [Benjamin] Bloom’s work [on elite performers in many fields]: All the superb performers he investigated had practiced intensively, had studied with devoted teachers, and had been supported enthusiastically by their families throughout their developing years. Later research building on Bloom’s pioneering study revealed that the amount and quality of practice were key factors in the level of expertise people achieved. Consistently and overwhelmingly, the evidence showed that experts are always made, not born.
...
The journey to truly superior performance is neither for the faint of heart nor for the impatient. The development of genuine expertise requires struggle, sacrifice, and honest, often painful self-assessment. There are no shortcuts. It will take you at least a decade to achieve expertise, and you will need to invest that time wisely, by engaging in “deliberate” practice—practice that focuses on tasks beyond your current level of competence and comfort. You will need a well-informed coach not only to guide you through deliberate practice but also to help you learn how to coach yourself. Above all, if you want to achieve top performance as a manager and a leader, you’ve got to forget the folklore about genius that makes many people think they cannot take a scientific approach to developing expertise.

On "deliberate practice":

... living in a cave does not make you a geologist. Not all practice makes perfect. You need a particular kind of practice—deliberate practice—to develop expertise. When most people practice, they focus on the things they already know how to do. Deliberate practice is different. It entails considerable, specific, and sustained efforts to do something you can’t do well—or even at all. Research across domains shows that it is only by working at what you can’t do that you turn into the expert you want to become.
...
Deliberate practice involves two kinds of learning: improving the skills you already have and extending the reach and range of your skills ...
...
It is interesting to note that across a wide range of experts, including athletes, novelists, and musicians, very few appear to be able to engage in more than four or five hours of high concentration and deliberate practice at a time.

The authors' emphasis that deliberate practice involves not only improving existing skills, but extending the range of those skills is quite interesting to me. During my MBA education, I plan to study Strategy and Marketing, which are completely different from the existing skill set that I have in Finance and Information Systems, my concentrations as an undergrad which allowed me to do well in Ford Finance. On the micro-level, I could say that my skills are specifically in Finance, spreadsheeting, and management of technology. But on a macro-level, I believe that my skills are my ability to think critically as a businessperson, my quantitative abilities that I've developed through studying and practicing financial analysis, and my understanding of how to use technological tools to solve business problems. In that macro-sense, studying Strategy and Marketing build upon my existing skills and make sense.

On the MBA case method as "deliberate practice" for making managerial decisions:

The classic example is the case method taught by many business schools, which presents students with real-life situations that require action. Because the eventual outcomes of those situations are known, the students can immediately judge the merits of their proposed solutions. In this way, they can practice making decisions ten to 20 times a week.

On the importance of coaches and mentors:

[Research] has shown that future experts need different kinds of teachers at different stages of their development. In the beginning, most are coached by local teachers, people who can give generously of their time and praise. Later on, however, it is essential that performers seek out more-advanced teachers to keep improving their skills. Eventually, all top performers work closely with teachers who have themselves reached international levels of achievement. Having expert coaches makes a difference in a variety of ways. To start with, they can help you accelerate your learning process.

This brings to mind the importance of having good mentors throughout one's career. People often treat a mentor as someone who is only useful in bringing you up the corporate ladder with them. While that's certainly one tangible benefit of having a mentor, relegating the importance of mentors to that definition discounts their value as teachers and sounding boards.

With regard to the article as a whole, I've long suspected that success consists of a series of habits, most of which won't take all that much time. For instance, by reading serious magazines/publications for 3 hours a week, you can learn a lot over time. (in other words, Maxim and Us Weekly don't count) Improving my skills is one of the reasons that I blog. By writing, I improve my written communications ability and really think through the ideas that I'm writing about. It takes effort and time, but I get a lot out of it.

As Ronnie Coleman, winner of the Mr. Olympia professional bodybuilder contest from 1998-2005, famously said, "Everybody wants to be a bodybuilder, but ain't nobody want to lift no heavy-ass weights." Well said, Ronnie. Well said.

How Hungry are You?

2007-07-26T21:14:00.000-07:00

While reading "The World is Flat", I've realized how comfortable we've become in the U.S. and it scares me. The key portion that struck me was a quote from Kai-Fu Li, former Microsoft executive and present Google exec (I met him at the C100 conference!), commenting on the work ethic of the researchers at their Microsoft research lab in China:

"They view this [opportunity] as a once-in-a-lifetime income opportunity ... They saw their parents going through the Cultural Revolution. The best they could do was become a professor, do a little project on the side because a professor's pay is horrible, and maybe get one paper published. Now they have this place where all they do is research, with great computers and lots of resources. They have administrators -- we hire people to do the dirty work. They just could not believe it. They voluntarily work fifteen to eighteen hours a day and come in on weekends. They work through holidays, because their dream is to get to Microsoft."

Granted, work isn't everything. And a friend made a good point that working hard isn't always working in the right direction. You can do your best to dig holes and fill them back up all day long, exerting a ton of effort while accomplishing nothing. But, still, just to have the willpower to exert that amount of effort ... It makes me ask myself, "How hungry am I?"

Business Book Recommendations

2007-07-25T21:20:00.000-07:00

To gain a general understanding of the philosophy, context and tactics of business, I've found these three books to be very helpful:

"The Essential Drucker", by Peter Drucker - An abbreviated compendium of management guru Peter Drucker's 60 years of writings, this book discusses Drucker's most important and influential ideas. Going well beyond promoting the latest management fads, Drucker's writings discuss management philosophy. The ideas that were most impactful to me were his discussions about the importance of management as a liberal art (not just as a trade), and how the rise of the "knowledge worker" redefines the nature of work and management.
"The World is Flat", by Thomas Friedman - Friedman defines the "flat world" that results from globalization and identifies the "flatteners" that brought about this flat world. He then explores the implications of the flattened world for global business, U.S. national competitiveness, geopolitics, and terrorism. This book provides a great analysis of the world today and gives you a solid context with which to interpret current events, relating to business and non-business issues.
"Good to Great", by Jim Collins - Following 5 years of research, Collins summarizes his team's findings on how "good" companies break out of their mediocrity to become "great" companies. Examining all 1,435 companies that have ever been listed on the Fortune 500, Collins' team identifies only 11 companies that have made this leap. Based on his team's in-depth study of those companies, Collins identifies 7 general principles that, in concert, have allowed these companies to make the leap. The book discusses the general framework created by applying these 7 principles together, providing helpful "best practice" tactics in thinking about management and leadership.

These three books compliment each other quite well. This is how I think about them. "The World is Flat" explains the playing field as it exists today and the recent technological developments that have made it so. "Good to Great" provides general tactics that have proven effective in various playing fields throughout time. "The Essential Drucker" discusses the history and development of the playing field, as well as the philosophy behind it, giving you a solid mental framework with which to think about it and an appreciation of today's playing field.

"Motivational" Poster

2007-06-22T18:22:00.000-07:00

This gem of an motivational poster is posted in my former office. I have no idea what the saying means. I have even less of an idea about what a young lady with topography lines all over her body has anything to do with the saying or inspiring viewers.

To me, this posters typifies all of the negative connotations associated with "leadership": the charismatic celebrity-manager who makes many grand pronouncements, but has little substance; the motivational posters with photos of eagles majestically soaring and hollow, blindly optimistic slogans.

Instead of motivating with flash and charisma, I believe in "the Stockdale Paradox," named after Vice Admiral James Stockdale, espoused in chapter four of "Good to Great": "Retain faith that you will prevail in the end, regardless of the difficulties, while at the same time confronting the most brutal facts of your current reality, whatever they might be."

To illustrate, the "old guard" management at my former company would turn "State of the Business" meetings into pep rallies, telling us how well our products were being received and how great sales were, in spite of a constant barrage of disparaging comments in the media. Not a word of our company's weaknesses was uttered. Coming out of these meetings, I left inspired and full of good feelings. But, upon reading the business headlines the following day, I realized that the management had just fed me a lot of crap. In contrast, the "new guard" management, who have gradually replaced the "old guard" over the past two years, repeatedly stated that we're at a deficit to our competitors and we have many problems, but we can work through them to fix the company. I found this to be infinitely more motivating, enduring well beyond the "State of the Business" meetings.

More Discussions on Leadership w/ Ford Finance Managers

2007-06-20T19:06:00.000-07:00

John L.:
Director, former Liberal Arts Student. I've worked in his organizations for almost 3 years and have been impressed with his frank, straight-forward style. About MBA education costs, he's said to me several times, "Your MBA is going to cost how much? I paid $12,000 for mine."

He considers his liberal arts education to be one of his greatest trainings, because it taught him to think critically, which is applicable to any situation. He uses the thinking skills he learned in undergrad much more than what he learned during his MBA education. A large amount of introspection and self-awareness is necessary in order to succeed as a leader. The liberal arts training provides the groundwork to help a person do these things.
His biggest challenge has been dealing with his organizations' daily fire drills, while maintaining a focus its long-term direction and strategy.
His ideal budgeting of his time would have him spending 70% on personnel issues and long-term planning, while spending only 30% on daily fire drills.
He has noticed that people of my generation would rather work for 9 hours a day and wait for the other members of a team in order to collaborate to reach a solution. In contrast, he believes that many people of his generation would prefer to work 16 hours a day to outshine and get ahead of their peers. He believes that the people who collaborate for 9 hours a day achieve better results than those who work 16 hours a day by themselves. And he's glad to see that the people of my generation are more willing to teach and coach each other, thus raising the capabilities and effectiveness of the entire organization.
He believes that the personality of an organization's top executive will pilot the organization's culture. If the top executive operates with a style that runs counter to the culture in which the senior managers are accustomed, the senior managers who report to him will either quickly learn to change their behavior to adapt to the new style or find the new culture distasteful and leave the organization.
There's a big difference between having a direct report who constantly seeks your counsel because he's afraid of making decisions himself and one who maintains good communication to make you aware of issues.

How Successful Leaders Think

2007-06-18T20:18:00.000-07:00

Today, I discovered that I can read magazines while working out on the elliptical machine! So I broke out an issue of the Harvard Business Review for the first time in months.

In the June 2007 issue, there's an article titled "How Successful Leaders Think," by Roger Martin, dean of the Rotman School of Management at the University of Toronto, in which the author argues that it's more important to study how effective leaders think, rather than studying their actions and decisions. And how they think is by using their "opposable mind," which he essentially defines as the ability to think in complex 3-dimensional spaces, rather than in simple 2-dimensional linear planes. But, unfortunately, most people choose to avoid complexity for a variety of reasons.

... we were born with opposable minds, which allow us to hold two conflicting ideas in constructive, almost dialectic tension. We can use that tension to think our way toward new, superior ideas. Were we able to hold only one thought or idea in our heads at a time, we wouldn’t have access to the insights that the opposable mind can produce.
Unfortunately, because people don’t exercise this capability much, great integrative thinkers are fairly rare ... Most of us avoid complexity and ambiguity and seek out the comfort of simplicity and clarity ... We crave the certainty of choosing between well-defined alternatives and the closure that comes when a decision has been made.

For those reasons, we often don’t know what to do with fundamentally opposing and seemingly incommensurable models. Our first impulse is usually to determine which of the two models is “right” and, by the process of elimination, which is “wrong.” We may even take sides and try to prove that our chosen model is better than the other one. But in rejecting one model out of hand, we miss out on all the value that we could have realized by considering the opposing two at the same time and finding in the tension clues to a superior model. By forcing a choice between the two, we disengage the opposable mind before it can seek a creative resolution.

The part of Martin's argument that struck the greatest chord with me was the idea that the most important ability of effective leaders is to be able to think broadly and creatively, synthesizing ideas from many perspectives to reach a greater solution. I've long considered "Guns, Germs and Steel" to be the book that has most influenced my thinking. Jared Diamond, the book's author and a renowned UCLA professor, developed incredible insights into how history took its course by bringing together information from fields as disparate as geology, biology, virology, history, archeology and meteorology. Studying any of those disciplines in isolation wouldn't provide a fraction of the insights that they provide together.

Martin advocates synthesis over simple either-or decisions, optimization over maximization, multivariate regression over linear regression. He advocates thriving in complexity, instead of treasuring simplicity.

The first step is figuring out which factors to take into account. The conventional approach is to discard as many as possible—or not even to consider some of them in the first place ... We also do this because of how most organizations are structured. Each functional specialty has its own narrow view of what merits consideration ...

In the second step of decision making, you analyze how the numerous salient factors relate to one another. Conventional thinkers tend to take the same narrow view of causality that they do of salience. The simplest type of all is a straight-line causal relationship. It’s no accident that linear regression is the business world’s preferred tool for establishing relationships between variables. Other tools are available, of course, but most managers shun them because they’re harder to use ... The integrative thinker isn’t afraid to question the validity of apparently obvious links or to consider multidirectional and nonlinear relationships ...

With a good handle on the causal relationships between salient features, you’re ready to turn to the decision itself ... The order in which you make these decisions will affect the outcome ... [When] the number of decision-making variables explodes ... comes the impulse not only to establish a strict sequence in which issues will be considered but also to dole out pieces of a decision so that various parties—often, different corporate functions—can work on them separately ... Integrative thinkers don’t break down a problem into independent pieces and work on them separately or in a certain order. They see the entire architecture of the problem—how the various parts of it fit together, how one decision will affect another. Just as important, they hold all of those pieces suspended in their minds at once.

However, I've thought a lot about the beauty of simplicity. As the Occam's razor principle states, "All things being equal, the simplest solution tends to be the best one." At work, I've experienced situations where, although we could have made an effective decision based on 80% information while doing 20% of the work, we still chose to expend the other 80% of the effort to have "full information" (a delusional concept in the real world), thus crippling the project/study. And in the end, the decision usually doesn't change.

I'll have to think some more to reconcile these two ideas.

But, with regard to business school learning objectives, it may be wise to learn to utilize concepts and insights from all of the different classes that we're forced to take in order to think as broadly as possible. This idea places business education on similar footing as a liberal arts education. However, the temptation is always there to treat b-school as a trade school, rather than a mind broadening experience.

Update 6/23/07:
I e-mailed the article's author about reconciling the Occam's razor principle with embracing complexity. His response:

I think Occam’s razor is correct but that the world interprets it to mean simpler is always better. Instead, I think the original intent of the razor was to make things as simple as possible without being simplistic. Integrative Thinkers hew, I believe, to the original intent and accept as much complexity as is necessary to come up with a compelling resolution.

What is "Leadership Potential"?

2007-06-12T20:22:00.000-07:00

A question that I had to consider when applying to MBA programs is, "How do I use the application requirements to demonstrate my leadership potential to the admission committees?" Really, your credentials are pretty much set in stone while you're applying. There isn't a huge change for you to dramatically improve your accomplishments. All you can do is spin like you're running for office. You'll be better off if you have foresight and plan ahead.

But, throughout the application process, I thought a tremendous amount about the real question, "What is leadership potential?" The best case is to thoroughly think about the answer to this question, identify your strengths and weaknesses, and actively take steps to improve your leadership abilities.

What I've concluded is that the kind of "leadership potential" that admission committees are looking for are:

The ability to affect people positively - By definition, leadership is the ability to affect people. If you can help co-workers perform better, or motivate a child to work harder in school, or help immigrants integrate into the U.S., then you demonstrate your empathy and ability to influence people.
Teaching ability - Teaching is a big part of leading. You MUST develop your people if you want to successfully develop your organization and its abilities.
Civic involvement - B-schools want to train leaders who are socially conscious. The idea of getting rich and living in a house made of endangered coral reefs and wearing rhino skin coats with baby seal lining is less tasteful now than it may have been 50 years ago. They want people who are going to be positive forces in society, not selfish and out for themselves.
The willingness to pursue your passion - Understand what you care about and work for it.
The ability to be effective at accomplishing tasks - Of course, being able to make things happen, either in the professional and volunteer sphere, is essential to being a good leader. There is no substitute for the ability to deliver results.

After thinking long and hard about these characteristics, I realized, "Hey, that's the kind of person I want to be, anyway!" And given that the opportunity cost of doing this is not that great for most people (e.g. drinking 2 nights a week rather than 5, playing a few less hours of video games a week), there's no reason not to get involved in the community or give back to your co-workers. And why not find opportunities to apply what you love doing anyway to help other people?

Who knows. You might even learn something and enjoy it.

Related:
Kim Clark (ex-HBS dean) on Leadership

The Great (Belated) Apartment Hunt

2007-06-11T04:44:00.000-07:00

For my student housing, I originally applied for McManus, the Kellogg MBA dorm, and stopped worrying about it. After all, I had been told by all sorts of people during the welcome weekend that everyone who applied for McManus last year got a room. My reasoning, "Pre-furnished, close to both campus and downtown Evanston? Done!" Some students worried that they wouldn't get housing at McManus, so rather than apply and wait for a month to hear back, they signed leases for apartments while they were on campus in April. As a result, many of the most desirable apartments were rented on that weekend. That didn't surprise me, since b-school students are all pretty Type-A to begin with.

On May 23rd, I received the news that I was put on the dorm's waitlist. Rather than worry, I had faith that I would get off of the waitlist ... until I spoke with half a dozen other people who applied to McManus and gotten waitlisted as well. After learning this, I planned to go to Evanston to find housing during the weekend of June 8th. Coincidentally, I received an e-mail from the McManus staff on the morning of June 8th informing me that the waitlist is hopeless.

Being the brilliant planner that I am, I spent the week finding a friend's couch to crash on and learning about all the parties that were coming up that weekend. An hour before I planned to leave for Chicago on Friday afternoon, I realized that it might be a god idea to set up some appointments for Saturday. After hyperventilating for a few minutes at work, I went home and started frantically calling apartment complexes and search firms. Most of the apartments were already booked up. Luckily, my apartment hunting weekend coincided with the day that the "the waitlist is hopeless" e-mail was sent and I have the advantage of living within driving distance of Evanston. In the end, I left an hour later than planned, but with several apartment viewing appointments. (There should be plenty of apartment search firms that opeate near most MBA schools, which operate off of commissions paid to them by the apartment complexes for finding residents for them.)

On Saturday, I went on an apartment tour with a search firm lady who showed me a bunch of "vintage" apartments that smelled bad or otherwise seemed unpleasant. I also saw an apartment complex that was independently run and I had read about on the Kellogg new student web board. Someone had gotten off of the McManus waitlist and withdrew their deposit from that complex (go figure), then posted about the apartment to help the landlord.

Although the apartment in the independent complex was a bit smallish, I signed the lease after looking at it for 5 minutes. I missed my original viewing appointment, so the landlady showed me the apartment with another person who was interested. It turns out that she needed to move in on July 1st, but the apartment was only available after August 1st. I'm not sure how the landlady would have settled the dispute if we both wanted it (square off in the octagon? gladiatorial death match?), but it worked out in my favor. Other people had seen the posting and were asking about it, so I knew that I had to be quick about my decision. Being the brilliant planner that I am, I didn't think to bring my checkbook, so I had to run to the ATM to withdraw my security $240 deposit. Thankfully Evanston is nothing like the south side of Chicago, but I still don't like walking around with that much cash in my wallet.

With that, the apartment hunt was over. Thankfully, I got everything taken care of. I also bought an amazing couch with down-filled cushions for $250. The couple who sold it to me were graduating from Kellogg and packing to move out of state, so they gave me a bunch of other furniture that they would have otherwise thrown away. It turned out to be quite a nice deal. A 1st year friend at Kellogg was gracious enough to let me store the furniture at her apartment for the summer.

Application Process Overview

2007-06-10T16:37:00.000-07:00

To summarize the MBA application process, I would break it down into 2 categories that characterize the candidate, split into 4 work flows.

The 2 categories that characterize the MBA candidate are:

Academic ability - Admissions officers attempts to determine how academically capable a candidate is. To do this, they use several measures: undergraduate GPA, difficultly of undergraduate courseload, information about circumstances that may have affected the outcome of the undergraduate GPA (having to work to put oneself through college, major illness, etc.), and GMAT score
Leadership potential - Admissions officers attempt to determine a candidate's potential to become a leader. They do this by going beyond one's professional experiences to evaluate the candidate as a whole person. Some things they use to measure this are application essays, letters of recommendation, undergraduate extracurricular participation, and volunteer activities. (more thoughts on what "leadership potential" is in another post)

The 4 workflows in the MBA application process are:

Take the GMAT
Obtain letters of recommendation (usually 2 or 3 per school)
Write the application essays
Fill out the application (sounds simple, but requires quite a bit of information gathering)

Hello from Taipei!

2007-06-06T00:52:00.000-07:00

Hello from the land of the tallest building in the world!

Thoughts on Leadership from Ford Finance Managers

2007-05-31T10:09:00.000-07:00

Since informing my organization of my impending departure, I have met with various managers that I have worked with and respect. As Paul put it, "When you're in b-school, everyone's willing to talk to you, so take advantage of it." So I am. Here's some things that I've learned.

Dave R:
Manager, Former Professor, One-Man Private Equity Shop, Supergenius.

The answer can always be derived with a simple analysis. The simpler, the better. Too many details clouds the answer.
Monopolies are good. In selecting gas stations, he found ones that had monopolies in their small towns.
Understand where your business makes money and maximize it. Dave discussed how he made his gas stations stay open 24 hours and sells gas at cost to drive traffic to the stations' convenience stores. "I don't care about the gas. I give the stuff away! These gas stations are really convenience stores that sell gas to bring people in. That's where the money really is."
Time is a person's most important commodity and the one in shortest supply. There are 168 hours in a week. Understanding that has been his most important realizations.

Sven R.:
Manager, spent the vast majority of his career in Manufacturing. When working for him, I found him to be very straightforward and full of integrity. He has specialized his professional experience in Manufacturing, rather than diversifying it, with the idea that he would rather be great at something than average in a lot of areas.

Being a successful supervisor requires having good people skills, just as being a good analyst does. He didn't have many surprises when he became a supervisor, because he works well with people.
You can tell who is going to succeed as an analyst and who isn't just by watching them. In a plant, an analyst could get by sitting behind his/her computer all day long and never interact with the operations people. A successful analyst works closely with the operations people and becomes a business partner to them.
The biggest challenge he discovered as a supervisor/manager is dealing with bad employees who work for him.
Motivation is hugely important. He'd rather work with less talented people who give 110% than very talented people who don't care.
The most rewarding part of managing people for him is helping good people develop and get promoted.

Amit S.:
Manager, worked in many different areas of Ford, in contrast to Sven. I have not worked closely with him, but he has a strong reputation and I have been impressed by him when I saw him in meetings.

One of his keys to success has been his curiosity. He always digs to learn more about things outside the scope of his own job, which allows him to have a fuller grasp of the business.
Attitude overwhelmingly affects a person's performance. He has never had a bad attitude about a job, because he always felt that he was learning from his work. With the mundane tasks, he doesn't complain about them. He simply completes them and moved on to more interesting things.
In response to my mention of a Harvard Business Review article that referred to new managers feeling like hostages, with no direct control over what goes on above and below them, he disagrees. He feels that it depends on how proactive someone is in managing his/her own situation. His predecessor in his present job complained about never seeing his family for 2 years; he would be in meetings all day long, then take care of e-mail, placing him in the office from 7am to 10pm. Instead of accepting the status quo, Amit worked with his 5 bosses and his team of direct reports to figure out which meetings he must attend and which ones he can delegate. As a result, he rarely misses seeing his family after work and remains very productive.

Mark R.:
Manager, former engineer turned financial analyst, spend most of his career in Product Development and Manufacturing.

As a manager in his new position, he has had to learn how to work with many direct reports located in distant locations with minimal supervision. Even though he had been a manager for many years, he has always worked closely with his team in a very hands-on manner, common in Ford finance. One big challenge is learning to work with his direct reports without seeing their work directly.
As a manager, your performance depends on the performance of your people. In order to get good people to want to work for you, you need to have a good reputation within the organization. Some managers perform well through brute force: working their people to death under the threat of torpedoing their careers. These people can't sustain their performance. If good people don't want to work for you, your performance is going to suffer.
In his early career as a manager, he wishes that he spent more time teaching and coaching people. There's a difference between telling people that you have an open-door policy if they have questions/concerns and actually being approachable so that people are not afraid to take advantage of your open-door policy.
Balancing the development of rising stars and the continual operation of the organization is challenging. Not everyone wants to be CFO, but many of those people are still solid performers. Those people provide the continuity in your organization, while the rising stars rotate in and out of different groups. It's important to recognize this and balance people's skill sets and career goals.
In his recent position, he has spent far more time on personnel issues than he thought he would. He has had to balance plant controllers and supervisors, such as making sure that one of the two has prior plant experience to ensure that continuity exists in the organization. No matter how bright a person is, his lack of experience can cause him to fail if he does not have someone experienced to rely on.

Committee of 100 Mentoring Session

2007-05-15T17:46:00.000-07:00

In April, I attended the annual conference of a group called the Committee of 100 (C100) in Manhattan. The group was founded by I.M. Pei almost two decades ago and is comprised of 100 extremely successful Chinese Americans from all fields, such as the cellist Yo Yo Ma, Nautica founder David Chu, and NVidea founder Jen-Hsun Huang.

On the final day of the conference, a mentoring session was held, in which young people were grouped together with C100 members who were successful in their fields of interest. I had the opportunity to speak with Clarence K., the only Chinese American partner at Deloitte, and Norm L., a high ranking finance manager at GE's aviation division. Here are some highlights from those discussions.

Thoughts from Clarence K.:

In response to "When was a time you failed and what did you learn from it?" (Wharton essay): In Taiwan, he took a job as the president of a record company owned by the "Taiwanese Warren Buffett", with whom he had served as a consultant. The venture failed because it did not obtain the distribution partnership with Sony Records. He said that one big contributing factor to his failure was his personality clash with the owner. Although they had worked together before, Clarence had never worked directly for the owner. He did not do his due diligence on the owner's management style, which was very command and control, whereas his style was to delegate. This difference in style led to many heated arguments and eventually to his being fired after the Sony bid had failed.
He noted that sometimes he wakes up and feels like a failure, wondering what he's accomplished with his life. It's refreshing to hear that someone who has done as well as he has feels that way at times.

Thoughts from Norm L.:

When he initially became a supervisor, he said that he received a terrible first performance review from his direct reports. He learned to delegate, give people some freedom to take ownership of a project and interpret how to do things.
Whenever he asks his team for a report-out on a project or study, he requires them to summarize it on one page. He feels that people get lost in the details if they're given too much room to explain, where putting it on one page forces someone to distill the situation to its essence.
Don't ever be the one talking during a meeting just to hear yourself talk. Be the one who makes 2 or 3 of the most insightful comments during each meeting. That will earn you a strong reputation and people will truly listen when you speak, as well as ask your opinion during meetings.

Recent Changes in B-Schools

2007-05-14T08:27:00.000-07:00

Excerpts from New graduation skills (The Economist, May 10, 2007 online edition)

Five years ago, business schools, particularly in America, came under attack from all sides. Fairly or not, they took some of the blame for the corporate scandals that erupted at firms such as Enron and WorldCom. Jeffrey Skilling, the former boss of Enron, was a star of the HBS class of 1979. Other corporate villains and their lackeys have boasted MBAs. Many agreed with one commentator that the only way to solve the ethical problems of corporate America was to fire everyone under 35 with an MBA.

Such criticisms unleashed a flood of concern, much of which had been building up for years. The value of the schools' main product, the MBA, was in doubt. It became fashionable to argue that the most useful thing a business school, particularly a top one, does for its students was to confer on them its stamp of approval by letting them in. Anything they might learn while they are there was a bonus ...

And so it continued. In an article published in 2005 the late Sumantra Ghoshal, of London Business School, argued that what was taught was practical, but in the wrong way. By focusing almost to the exclusion of all other behavioural models
on “agency theory”—which assumes that executives are the self-interested lackeys (“agents”) of shareholders, driven by maximising their self-interest—business-school teachers had freed their students from "any sense of moral responsibility” ...

Today the mood in business schools is a lot happier, and not just in America but also in other countries, which now boast more business schools and many more MBAs than ever before. Applications have recovered strongly and the salaries offered to business-school graduates are rising again, as is the share of graduates from the class of 2007 who have already secured their desired job.

Post-Enron, most business schools have introduced or have beefed up their teaching of ethics, often under the banner of leadership. However, a lively debate now rages about whether this is best done separately or as a part of every subject ...

The other big change is an attempt to make business education more practical. Most of the critics of earlier MBAs condemned their increasingly abstract, academic content ... Many schools are trying to increase the practical side by giving a greater
role to business, including inviting business people to speak to students ...

With regard to ethics of management and agency theory, I've been reading Peter Drucker's take on it in The Essential Drucker, which is an amazing book -- it's essentially a philosophic take on defining and thinking about business. More on that later.

Hi from Tokyo!

2007-05-14T05:30:00.000-07:00

Hello from the land of the rising sun!

Volunteering

2007-05-01T13:33:00.000-07:00

I'll quickly touch upon extra curricular activities and volunteering. There are 3 things to keep in mind:

1) Make sure you enjoy it.
2) Impact is more important than high profile.
3) Make sure it fits into your overall personal story.

I know it's vague, but it's better that each candidate figures this one out on his own and do something that is meaningful instead of following the cookie-cutter approach.

GMAT Part II

2007-05-01T13:21:00.000-07:00

Alan wrote a couple of great posts about the GMAT to kick start this blog, and I have been referring my college friends who are studying for the test to check out this site. Below are my thoughts and how I studied for it:

The main thing is to go in there relaxed. The first time I took it, I was pretty stressed, so I didn't do that well. But the 2nd time, I was really relaxed, because I kept telling myself that I can take it again if I don't break the 700. With the new mentality, I did pretty well.

I started with the Princeton Review to understand the different types of questions and to learn the tricks. Then, I took a lot of practice tests, including the essays in order to build up the mindset for a 4 hour test. I spent about 1~1.5 hours a night doing practice problems off the Official GMAT Guide, and on weekends, I took the practice tests. I spent about 6-7 weeks total, and I took 7 practice tests.

Note, the Kaplan tests are really hard, so add 100 points to it. The Princeton Review tests were okay, they were a little easier... the most representative ones were from www.mba.com that I downloaded, so save those 2 tests last.

Good luck!

Day at Kellogg (DAK)

2007-05-01T04:33:00.000-07:00

Over this past weekend, I attended the Day at Kellogg, or DAK as it is affectionately referred to. In terms of activities, it's pretty typical of admitted students weekends. They broke us out into small groups, played icebreaker games, made us watch slideshows, marched a bunch of popular professors in, brought the dean in, gave us free food and drink, got a bunch of current students to talk to us, then took us out to really crowded bars.

Being the undisputed top marketing school, their execution should be better than most other schools ... not that I'm qualified to judge. Kellogg's admit weekend is the only one that I attended. The school focused on selling itself based on five key points (or marketing messages, if you will): the overwhelming superiority of its marketing curriculum, its collaborative teaching model that has been emulated by other schools, their faculty's emphasis on teaching in addition to research, the degree to which students are involved in setting the agenda and organizing activities, and its strength in placing people into Wall Street finance jobs ("We're not just a marketing school, you know!"). To demonstrate the what teamwork meant at Kellogg, they had us do a group project to create an apparatus that would protect an egg when dropped from 12 feet. In discussing the importance of teaching collaboration, they referenced a Fortune Magazine article, The Trouble with MBAs (4/23/07), which discusses the lack of teamwork abilities in MBA graduates.

The other prospective students were great. I met a lot of people that I would be happy to attend school with. There were, of course, the seeming majority of people were from banking, private equity and consulting. But there were also a bunch of others from random industries and with random hobbies. I met someone who was a regular contributor to Shanghaiist (associated with Gothamist), another who was an event planner, a triathelete, someone who had completed the "Escape from Alcatraz" race, and a couple high school teachers. It seemed like many people who were choosing between schools had also gotten into Chicago GSB, and they were primarily finance/quant people. I only met one person who was deciding between Kellogg and HBS.

As for gripes about DAK, I learned more acronyms in three days at Kellogg than I have in 4 years at Ford. I wonder if it's indicative of the midwest's industrial culture to encourage the gross proliferation of acronyms (GPoA). The second gripe I have is that they also decided to start the programs at 7:30 on the first morning and 8:30 on the second -- way too early. My last gripe is that the bars we went to afterwards were all loud and crowded. I guess the crowded aspect is a given, but they could have chosen other places where we didn't need to scream to be heard. But all-in-all, minor things.

Of course, any discussion of welcome weekend experiences isn't complete without mention of the freebies. DAK freebies included a Kellogg t-shirt, a Nalgene bottle with the Kellogg logo, a Kellogg pen, a Kellogg notepad, 2 bag lunches, and a glossy Kellogg folder. Everything was well-branded with a prominent Kellogg logo and contained some element of purple -- the marketing lessons were not lost on those who designed the swag.

Overall, the weekend was fun and informative, albeit exhausting. From what I could gather, the Kellogg student philosophy was perfectly encapsulated by a quote that someone saw on a professor's office wall: "Be like a duck. Appear calm on the surface, while paddling like crazy underneath it."

1-on-1 with Mark Fields

2007-04-27T14:15:00.000-07:00

Having made my decision about HBS, I started networking within the company to see what I need to do in order to reach my long-term goal of running a car company. Knowing that our company's President Mark Fields (bio) was an HBS alum, I reached out and emailed him and asked for 5 minutes of his time. He accepted within hours of my email request, and asked his assistant to set up a 30 minute call with me. Below are the topics we touched on and the lessons I learned:

Career path:
Mark Fields started at Ford in Marketing & Sales, where he developed a good understanding of customers. There, he worked on the marketing plan with product development teams in order to understand the PD process. Later, he worked on several functional assignments and eventually got tapped into general management assignments.

Keys to success:
Mark "zigged when others zagged." He took risks and accepted jobs that no one else wanted. He went into troubled areas, from the heavy commercial truck business, to overseas assignments in Argentina, Japan, and Europe, because he felt that's where he can learn the most and can have the biggest impact. For example, in 1998, when Mazda was on the brink of bankruptcy, nobody wanted to be associated with a troubled business. But Mark agreed to move to Hiroshima and become the Marketing & Sales Director. A year later, he was tapped to be the CEO of Mazda.

Going overseas. Mark highly suggested international assignments because the smaller operations allowed him to see the whole business. Instead of concentrating in one vertical function as other people would do at Ford North America, he was able to see the business horizontally. These assignments gave him a chance to be the general manager and run the enterprise, rather than just one function.

Climbing to the top. In order to run a car company, Mark values the importance of understanding:

The product development process. The PD process is a combination of understanding consumer inputs, how to turn concepts to production vehicles, purchasing, manufacturing, etc.
Finance. A leader needs to know how the business makes money
Marketing and sales. Understanding how the products are distributed to dealers and how Ford Credit help with the sales side.

Harvard Business School:
Mark enjoyed marketing and leadership classes at HBS. He believed that the "hardware" side of the business (finance, accounting, etc.) could be learned on one's own by picking up a text book, but the "software" side (how to lead people and organizations) required more teaching and learning. At HBS, he enjoyed the History of American Capitalism taught by professor Richard Tedlow, in addition to other marketing courses.

The most important lesson that he learned at HBS was to "work smarter, not harder." Because the case method provides so many variables, he learned to focus on what's important. Also, because of the workload, he learned to prioritize, and surround himself with smart and able people that he could rely on.

Last words of wisdom:
Mark said that in business school, there will be a lot of opportunities to explorer other functions, industries, and companies. Make sure to "scratch that itch" and find the job that you truly enjoy.

Lee Iacocca on Leadership

2007-04-24T10:16:00.000-07:00

Excerpt: Where Have All the Leaders Gone?

Curiosity
Creative
Communicate
Character
Courage
Conviction
Charisma
Competent
Common Sense

Grade Non-Disclosure Debate

2007-04-24T09:56:00.000-07:00

The people on the Kellogg admitted students' message board are quite good at investigating things over the internet. They uncovered an incredibly thorough document that the Kellogg Student Association (KSA) put together in 2005 discussing the pros and cons of grade non-disclosure policies (GND). It's not accessible to people outside of the Kellogg intranet, so here are the highlights of the discussion:

The KSA performed a thorough investigation of GND in 2004-2005. Upon voting on whether to return to GND, the Kellogg student body voted to keep grade disclosure.

Definition of a Grade Non-Disclosure Policy:

Recruiters are not to broach the subject of grades with students.
Students are not to broach the subject of grades with recruiters.

Arguments In Favor of Grade Non-Disclosure:

Grades are not a complete measure of an individual’s abilities.
Grades increase the level of negative competition in the classroom.
Why should I be punished for working in an ineffective team?
Grades at Kellogg are not particularly meaningful; a high B and a low B both receive a 3.0.
Students are pre-screened for academic excellence during the admissions process; that should be a sufficient indication of academic ability for recruiters.
Students could challenge themselves in tougher classes without fear of a low grade affecting their career.
GND would allow professors to spread grade distribution without fear of ruining a career with a few C’s.
Students are motivated to learn by their two-year, $60,000 investment, not grades.
Other top business schools have a non-disclosure policy. Why should Kellogg be at a disadvantage?

Arguments in Favor of Grade Disclosure:

Individuals own their grades; they should be allowed to use them to market to recruiters.
Without grade incentives, students will put less emphasis on classes and group work, which could adversely affect Kellogg academics.
Recruiters prefer to see grades. We should help to satisfy them.
Recruiters will instead shift emphasis to academic honors, GMATs, or even undergrad grades and SATs.
How would this policy be enforced? It cannot be a breach of the honor code. If some students don’t abide, it hurts others.
Recruiters will find a way to get a student’s academic performance. Interviews may become more like a test.
GND may hinder group work due to mismatched goals
Our current policy of disclosure gives us a distinct competitive advantage in recruiting.
GND may drive a move towards a more traditional forced curve.
Kellogg has more career switching students than some of our peers, and GND is more of a hindrance for career switchers
Grades increase the level of class preparation and participation

Top Schools with Grade Non-Disclosure (as of 2005):

Chicago
Haas
Harvard
Stanford
Wharton

Top Schools with Grade Disclosure (as of 2005):

Anderson
Columbia
Darden
Dartmouth
Kellogg
Sloan

Recommendation Letters Part III

2007-04-24T07:22:00.000-07:00

I think both Alan's did "boom goes the dynamite" jobs on explaining the strategies for recommendation letters, so I really have nothing to add in terms of strategy. I'll just post about my own experiences.

My recommenders and how I chose them:
1) Current direct supervisor - wrote the letter for all 4 schools. Throughout the 2 years that I've worked for him, he has seen me grow both professionally and personally. He gave me honest feedback and constructive criticisms during my performance reviews, and I have shown that I could take his criticisms, learn from them, and then improve myself. He also witnessed my love for cars firsthand. Therefore, I asked him to write about my ability to overcome failures and my passion for automobiles.

2) VP from my prior job in investment banking - 3 schools. West Point grad, Army Ranger, right-hand man to the commanding General of the Pacific fleets, my old boss IS leadership. I asked him to write about my leadership traits that he observed during my two years of banking.

3) Managing Director from my prior job in i-banking - 1 school (his alma mater). I asked my MD to write about my leadership traits, as well. And I used his letter in place of my VP's letter for his alma mater.

4) Launch engineer - 3 schools. This engineer was extremely experienced, having worked at all of the Big-3 sometime during his 30 year career in the auto industry. And during 6 months of launch, he saw me interact with the union workers to the plant managers. Thus, I asked him to comment on my ability to work with people.

Timing:
I gave them 3 months of time. All but one took until the last week before the application deadline to finish. I did call and email them to remind them that it was due.

George Foreman Grill:
Love it. I oftentimes wondered how people lived without it.

2007-04-22T16:44:00.000-07:00

I feel like the guy in class who always raises his hand to say: " I agree with what was just said" and then repeats what was just said in slightly different phrases. It's just that Mr. Huang is so on top of things. (He's the kid that did the reading the night before). I promise to post my own topic one of these days. Anyways:

I agree with Mr. Huang. His recommendation letter advice is excellent. I will add a few comments.

On asking people that like you:

Identifying advocates is something that you should start considering long before you even begin the process for applying. That goes back to networking but in my mind, I like to think of it as different from networking (even if it isn't and just that I'm still think of "networking" as schmoozing. B-school applications aside, you always needs advocates, friends, patrons, role models and mentors whom you respect and who in-turn respect you. The truth is no one makes it to the top alone. Life and career are better with people who like you. Getting someone to like you, be impressed by the good things you are now doing, or even know you exist two months before your application is due isn't going to work.

On the workload of letters:

Good recommendation letters are a LOT of work, especially if you are applying to multiple schools, so be sure you let your recommenders know upfront. If the person you ask for recommendations seems to hesitate or balk at the workload, you might want to consider someone else (if you have options). How strongly do they support you if they aren't willing to devote some time to this?

Still, personally, I think you should apply to no more than 5-6 schools. Anymore and you and your recommenders don't have the time to make strong, focused and unique cases for yourself. After all, how will you convince each school they are THE school for you when you can't seem pare down your choices to 5-6? But even at 5-6 schools, it's a lot of work.

On managing the recommendations:

Some are great writers, some aren't. Some just aren't sure what constitutes a good "Business school recommendation", which is different from a letter that says you're very nice and thoughtful and good. You have or should have a general idea what the schools you're are applying to are looking for. If you don't, better do your research and figure it out. Therefore, in "managing" you must effectively communicate this objective to your advocates. However you explain it to them, you must try to get them to understand that it has to be their own words and their own feelings about you, but it must support your overall objective of building a case for yourself. They must decide if they are able to honestly support your application as a marketing campaign that focuses on drilling into the minds of anyone who reads it two or three main themes about you. If you were a grill, they gotta want to be George Foreman - without the $300M endorsement fee of course. (On a digression, you think George Foreman would use that grill if they didn't pay him? I think he would. Redman gave them a plug on MTV cribs, and he doesn't get paid for it. It's just an awesome grill)

While you are a complete person, with many good qualities and capabilities, word limits, bad short-term memories, and attention spans say you can't be all of them in your application. You're aren't perfect. You aren't every superlative in the English language. You don't have passion for 20 different things. Your career goal isn't to cure cancer and end world poverty and write a Pulitzer's prize winning novel about curing cancer and save beached whales, and be an investment banker. At least not all within the same decade after graduation. (I might be wrong here. If you really have such great ambitions simultaneously, I rejoice, for humanity, for the unborn children. But do you really need or want to go to business school? Don't you have a direct line to God and all his infinite wisdom?)
So your recommendations should be filled with specific anecdotes that support the major themes that differentiate you as well as honestly assess your areas for improvement.

More on managing:

Even if your recommenders tell you to, don't want to write the letters yourself (unethical, will get your application thrown in the trash if the admin officer thinks you wrote it, and not effective because you're basically going to say the exact same things you say about yourself in your essays and in the same way unless you're a really great actor schizo type person with great literary ability). People who really want to help you will want to write the letters themselves.

You also don't want to be so overbearing and "helpful" that you take away their unique perspective and style. It's a fine line between helping them focus on the objective and completely influencing them. Tough task.

On tips:
- Take them out to lunch and talk to them about why you want to go to schools and how you think you qualify for those schools. Talk about your career goals, your strengths and weaknesses. Ask them for their honest opinion. (more important to get them to talk than you dominating the conversation) From there, you can discuss how it all ties to your themes.
- Take them all out to lunch together and have them talk to each other. I found that to be extremely helpful in creating a sense of a joint project. Also, one or more of your advocates might take it upon themselves to make sure the others doing a good job and also that they aren't writing the exact same thing.
- If it comes down the last week before the deadline, call them every couple hours to make sure they've submitted your application. As great as these people are, they are busy and we all procrastinate. Call them. Email them. Then call them again.

Strategies for Recommendation Letters

2007-04-17T07:39:00.000-07:00

One big part of the MBA application is the letters of recommendations. Like all things, getting quality letters of recommendation depends on the amount of time you put into it. You need to manage your recommenders. They want to help you out, but sometimes they may not have much experience with writing letters of rec, or may be very busy. It's your job, as someone asking for a favor, to help them understand what to do and keep them on task. Here are a few things that I found helpful:

1.) Diversify your recommenders
For schools that require 3 recs, many sources of MBA advice recommend 2 work-related recommenders and 1 community service-related. Many schools require your direct supervisor be one of the recommenders, so avoiding informing them about the possibility of your leaving the company is out of the question. You should consider choosing people with whom you have worked closely on different types of projects or assignments. That way, they won't be writing about the same anecdote or project, which will give a narrow view of your abilities. From personal experience, I made the mistake of having my entire management chain for my previous assignment (my supervisor, manager, and senior manager) write recommendation letters for Harvard. I realized too late that it was a very one-dimensional approach, so I wasn't surprised I didn't even get an interview invitation.

Keep in mind that you may not want to ask all your recommenders to write your recs for every school, since it's a fairly time consuming process. Thus, identify which schools you want which recommenders to write letters for.

Lastly, make sure that they know you well! Title doesn't matter. Quality and depth of insight does. Think of how their letters will verify and enrich the anecdotes you write about in your application essays.

2.) Prepare a recommender information packet
Don't expect your recommenders to remember everything about your interactions/projects with them, memorize your application due dates, or know how to tailor their recommendation letters to each school. I put together an information packet for my recommenders. In this, I included the following:

Discussion of my purpose for applying to b-school and what I hope to gain from it
List of recommendation letter due dates and recommender follow-up dates
Discussion of my thoughts about leadership
Resume and summary of my employment (salary, performance review results, promotions)
Notes on writing a good recommendation letter (including Accepted.Com's Recommender Tips)
Notes on each school's unique characteristics and what they look for in candidates
Copies of each school's recommendation forms

3.) Secure recommenders as soon as possible
As soon as you decide on your recommenders, sit down with your them briefly and explain your decision to apply to business school. Tell them why, based on your past working relationship, you have asked them to write a recommendation letter for you. Briefly walk them through your recommender information packet. Give them ideas about how they might use their anecdotes to appeal to different schools' sensibilities. Inform them that you will follow-up with them to answer any questions they may have, though most of them will recognize this for what it is: a euphemism for, "I'm going to call you at some point to prod you to write faster!"

Don't feel uncomfortable to ask them straight-up whether they will write a good recommendation for you. People will answer honestly.

With regard to notice, I approached my recommenders 2 months before the deadlines, which ended up being 6 months because I missed all but one of my Round 1 application deadlines. But, you get the idea.

4.) Follow-Up Throughout the Process
Once your recommenders are on board, make sure to keep them informed during every step of the process! As Paul says, share every little success with them. After spending a few hours touting your strong points, your recommenders are now your cheerleaders! I have maintained great relationships with my recommenders, and have even approached one to be a mentor afterwards.

Thoughts on MBA Workload Management

2007-04-13T09:39:00.000-07:00

I just came back from lunch with John, a friend who recently graduated with his MBA from UNC Kenan-Flagler. He gave me a great piece of advice on MBA workload management:

Figure out how much homework you need to do to get by and don't do any more than that. Any time that you spend on homework is time you aren't spending working toward your next job or getting to know your classmates better. When you form class groups, make sure everyone's expectations and goals are clear. If you have 2 people who are set on getting an A in the class and 2 others who don't care, it unnecessarily breeds resentment. And make sure that you don't get stuck being your group's workhorse, because the entire group usually gets the same grade. If you single-handedly earn the A for your group, your classmates come out ahead because they've spent that extra time elsewhere.

Given that Kellogg has re-instituted grades, I'm anxious to find out what this means in terms of how hard I need to work. Grades bring back bad memories of Wharton undergrad ...

Related:
Debate on Grade Non-Disclosure

IvyGate

2007-04-10T19:13:00.000-07:00

For those of you attending Ivy League b-schools (psh ... that was SOOOOO undergrad), there's IvyGate. For what it's worth, here's their irreverent take on Ivy b-schools.

2007-04-06T08:22:00.000-07:00

Not sure I know exactly what I want to post today. I have the day off, sitting in bed. I just read Mr. Huang's post, so I'll just start rambling from that train of thought and see where it leads me if it's seems scatterbrained, I apologize beforehand:

In my mind, there are two main categories for those that choose to pursue an MBA. The first kind are people who are already in the profession of their choice, who like their jobs (or willing put up with it for the rest of their lives) and who are ready for more of it. They want more responsibility, more pay, more leadership and status in their current field. A typical example is that of an engineer who wants to become a chief engineer. They pursue an MBA as a means to move up. The second group of people don't want to do what they're doing at this moment three years from now. They might have a passion for something else, they might have no passions other than loathing of their current job, they might want to just make more money. They pursue an MBA to move out, move away to some greener pasture.

For either of these cases, I think the general rule of thumb is go to the best school you can. Financial issues should not the most important factor in your decision making. The fact is, if you're worried about not being able to afford an MBA, you're not confident the MBA program you're choosing will help you find employment with higher earning potential or job satisfaction, or whatever it is that you value and seek in a career, that will justify your investment in the long run. Then forget it or delay it. Maybe it's not the right time. Just my opinion.

If you do feel confident this is something that will pay for itself in the long run, you gotta go for it and leverage yourself. Borrow whatever you need to. Eat peanut butter and Ramen noodles for a couple years if you have to. (actually, have you ever tried the two together? it's pretty good when it's hot, but gets really gross when it's cold.)

I think this is applies to both types of applicants but perhaps more so for the latter. For the former, if you know you're going to stay within the same field, perhaps even same company, there are tremendous benefits to having your company pay for your education. If you go part time, you can have earnings and still be racking up work experience. This might outweigh whatever value you get out of taking two years off. This might mean the quality of the school you go to might not be as important than if you were the second type of applicant. The schools you apply to might be limited to those near your workplace. The flip-side is, as a part time student, you do miss out on a lot. No matter what they tell you, it's my opinion that so much of the networking, academic environment, community, recruiting opportunities, are not available to the part time student. Besides with a job, you won't be able to fully concentrate on you and your educational experience, (more on that later). Oh, and it takes longer and is tougher.

But for those that are deciding to go full time, (by all means go full time if you can especially if you're going to switch career tracks), if you want concrete advice, here is my bigoted, elitist, opinion: Chose from only the top 25 or so business schools. If you have good credentials, decent grades at a top university, decent work experience, apply to only the top MBA programs. It's not like college where there are many many good schools and you can receive a fine education any number of them that might not be "ranked".

The rankings are a whole other debate that perhaps we can go into later, but generally the top schools vary back and forth but they're all up there consistently on all of the rankings and on the tips of people's tongues. As your friends who know, ask people in industry, ask enough people and read enough and you'll have a pretty good idea who's considered among the top schools. (i don't care what they say, MBA programs care about their rankings--it's part of their reputation to the general public and important signal (read below))

Beyond the "education" and "experience" the MBA is largely about reputation, network, and resources, meaning schools ability to give you opportunities to reach your goals. Money, faculty, reputation, connections academic, among students, and industry. (don't i sound terrible?) Anything outside of these top schools will not be worth the investment. If you stay with your current company, it's a boxed that gets checked saying you are ready to move up a notch. If you're trying to move to another field, you'll find that among top employers, you don't get as many considerations, you don't get the same pay offered to you even if you do get the interview.

The fact is, the longer you are out of school, the less important what school you went to. In fact, I feel that after a year out of school, your reputation and career will be determined mostly by your abilities and hard work and some luck. School will be mostly irrelevant. That being said, the school you go to does determine what doors open up to you initially.

Some would say an MBA is more of a degree than an education. The idea is that in a labor market with imperfect or incomplete information, given the costs of hiring and even greater costs of firing, employers want metrics to judge prospective employees. The essential service provided by the business school is to act as a match-maker of sorts. Through its rigorous application process, schools absorb a significant cost of identifying, sorting, ranking, and selecting qualified candidates that would otherwise require a huge investment of time and resources on the part of employers. For those who are about to drop $150,000 on an MBA, it is interesting to note that the cost of this service is borne almost entirely by the student upfront.

That isn't to say students don't benefit from the MBA. In earning the degree, students receive a certification of sorts that signal to the market place the quality of their talent, thus enhancing their employment prospects, so and so forth. In a tight labor market, salaries and sign-on bonus skyrocket, and in a way, are kick-backs to the student from the employers for funding the initial investment.

Coming from this perspective, some would argue this is the reason MBA programs are structured to be two years only, with a huge amount of time in those two years spent on job hunting rather than studying. And the course of study is lacking in depth--more a mish-mash survey of sometimes wholly unrelated topics loosely tied together under the banner of a vaguely defined business management education.

I have heard that many professors dislike teaching MBA classes, overstocked with primadonnas, whiners, who have no real interest in academics because they know in a year they will earn twice as much as the professor, and that in some classes, over-achieving undergrads who have applied for special permission from their dean to take Business school classes will spoil the curve for lazy, intellectually stunted MBA students.

Do I believe this?

For the most part, yes. I've seen the "just tell me the answer I need to know to get an A and get that job" phenomenon. So yeah, I know that is the case for many. But I have to qualify that. I don't think it has to be the truth for the individual that chooses otherwise.

At the end of each day, it is what you make of it. If you're going to take two years off to do something that is entirely selfish, why not really maximize the benefits and opportunities you have open to you, beyond just jobs and pay and those boring things? I say selfish because in pursuing an MBA, you cut-off your source of income, you take on debt, all in order to do something that is completely for yourself.

The way I see it, most likely, I will never be a student again after this. I will never be able to live the way students live. I will never be in a environment where I am expected to read and think about problems that may not have any apparent value to me. I will be surrounded by some of the brightest minds in the world, given time and access to glimpse their world. I will be surrounded by intelligent, thoughtful people, (some of whom may be MBAs as well), who are interested in more than excel spreadsheets.

Part of it is that I want to relive college again. People tell you that college is the best time of your life but you never believe them when you're actually there. Only when you leave do you realize how great it was. And you're sad that you didn't realize it at the time, because you could have done so much more. For me, it's not so much the partying, drinking, and girls--at the time, I think more of that would have been nice. But now, it's not really want I want out of two years (though I know there will be a group of students who are looking forward to exactly that).

For me, perhaps I want to repent for some past sins as well as relive some truly happy times:
I want wake up in the morning and look forward class. I think I'll pick a seat right in the middle front of the classroom so that the Professor can see that I'm not sleeping in the back, trying to avoid eye contact. I think I'll do my homework too. I want to ask the professor out to coffee and pick his brain, maybe we can be friends and play squash once a week even though I currently don't own a racket. I want time to read a book from cover to cover once in a while instead of the introduction, jacket, and then epilogue and learn something new to talk about at a dinner party where half the people will nod politely but wonder to themselves why is he was so excited something so....nerdy. Actually, scratch that, I'd want to be at the dinner party in the apartment next door, where they tell me I'm wrong and because recent studies have shown otherwise. I want to sit in a great library again, at a large oak table, and fall asleep in the middle of page 497 of some obscure text. I want to smell the musk of old books. I see myself walking home along tree lined streets, past the brown stones, at night in early autumn (we have an Indian summer of course) bag heavy with papers, tired -- but a good tired, the kind that tells you that you had a good day and lets you sleep well so that when you wake up, you're refreshed.

And I want.....well, all that other stuff about jobs, and career, and recruiting, that will probably consume my life as an MBA student to the point that everything in the last paragraph was just a wishful dream.

Prior to Spending $150,000 and 2 Years ...

2007-04-05T20:09:00.000-07:00

In deciding to pursue an MBA education, I initially didn't think a whole lot about what I wanted to get out of it. As someone of Chinese descent, I grew up thinking single-mindedly that education is good, regardless of what it is. But, after disagreements with my parents in college about my decision to pursue a history minor (they wanted me to try something "practical", like comp sci), I started thinking about the purpose of education. As a result, I began to see college as a great opportunity to expose myself to a variety of new ideas and different perspectives, whether related to my business major or otherwise. This new mindset made all of the difference. I left college with a great intellectually curiosity, causing me to act on the idea that "you don't know what you don't know", and encouraging me to explore new things, though somewhat aimlessly at times.

After much thought, I've realized that the decision to pursue an MBA is different. During undergraduate, students aim to expand their minds, explore their interests and shape their personalities. In choosing to attend b-school, it is assumed that one's personality has already begun to take shape and one's goals for school are more focused and pragmatic: to learn business theory and develop oneself as a leader.

After realizing that 2 years of MBA school costs $150,000, and twice that if opportunity cost of lost wages is included, I quickly realized that I had better think through my decision. Consciously, I told myself that b-school is vocational, plain and simple. Yet, I couldn't let go of my ideals of what I thought an education should be. In the end, I have come to terms with the fact that the dollar signs on the MBA tuition bill had better translate directly to dollar signs on the paycheck afterwards. However, given that I will receive the going rate for MBA graduates, the real question becomes "What do I want to learn and what experiences do I want to gain in school?" 20 application essays and 100,000 words later, I've realized what I want to gain in my expensive 2 years in b-school:

International Business Experience - Having grown up in the Midwest and spent my short career in the U.S., I have no experience with international business. This is especially important, as international markets are becoming more and more open.
Decision Making Skills - I do not, by any means, consider myself an indecisive person. But, when faced with decisions at work, I get a little nervous and overthink things, even after dozens of hours of analysis. My organization's top finance manager once told me, "It's lonely at the top. If I'm nervous about making a decision, I'll go across the hall to my boss and ask him what to do and the burden is off of my back. But who's he going to turn to?" I attribute my pensiveness in part to my training in a corporate environment, where I'm not given any decision-making responsibility, and in part to my personality. In completing case studies and assignments, I aim to gain confidence in my ability to come to conclusions and take a stance, while remaining open to things I hadn't considered.
Building the Network - In an earlier post, I discussed my new way of thinking about networking. I aim to meet people from all different backgrounds, industries and walks of life. This is particularly important to me, since I was quite shy throughout undergrad. Paul recently challenged me to take on one of his goals: to meet and get to know everyone in my class. It seemed daunting, until I realize that his HBS class is twice the size of my Kellogg class. It's a great goal and one that I'll try to pursue.
Developing My Leadership Abilities - Can leadership be taught? I don't know if I can answer that. But I can say that I've learned a tremendous amount through hearing others' experiences, which convinces me that studying leadership is a great way to improve one's abilities. I'll be paying special attention when I work in class groups, lead student organizations, go through leadership trainings.

Paul's Admission Results

2007-04-05T13:57:00.000-07:00

I have had my eyes fixed on the monitor for the past 10 minutes. Ding, "You've got mail;" the subject reads "HBS Decision Available Online." The timestamp is 12:06pm.

I extract myself from my chair, and begin pacing back-and-forth in my cubicle. I put my hand on my mouse, but my index finger refuses to click through the link. I stand up, and force myself to get a drink of water from the water fountain down the hall. 10 minutes pass.

Returning to my cube, I sit myself down. I take a deep breath, and I click through the link. I could feel my heart being suspended in mid-air...

Today marks the official completion of my business school applications process. While it was long and arduous, I think my efforts have paid off in my reaching my #1 choice school.

Throughout the process, I would say that the most gratifying moment came not when I found out that I was accepted, but when I realized that I have given my 100%. In my many essay revisions, the very last edit was changing from "like" to "such as." At that moment, I knew I was done, and even if I were rejected by all the schools I applied to, it wouldn't be because of a lack of effort. Here are my results:

Round 2:

Harvard Business School - interviewed, accepted
Stanford GSB - interviewed, rejected
Kellogg - interviewed, wait-listed, withdrew
Wharton - interviewed, accepted

I will say that I got accepted not because I was qualified, but because of all of my friends' help and support in correcting my essays and conducting mock interviews, not to mention a dash of luck.

Overture

2007-03-31T07:06:00.000-07:00

I went to the admitted students weekend at Chicago last month. We talked about goals, careers, pursuit of passions, leadership, and class trips to Costa Rica. Everyone you meet at these things tries to appear like they know what they're doing. The admitted students want you to know they have goals and that this school didn't make a mistake. The second years want you to know they have jobs now and know exactly what they're doing with their lives. (The lucky few do). But you listen closely and long enough and you hear:

"I guess the room I've been assigned to for panel discussion is strategic management. I think that's what I must have written in my essay for my career goals."

"Well, I wanted to do something different with my life, something great, out of the ordinary. Something I could really love and be passionate about. I'm going to be a consultant."

I'm thinking investment banking.
I'm thinking consulting.
Banking..wait, did i talk to you earlier? I meant I'm trying to decide between banking and consulting.

I've been watching a lot of old samurai movies lately through my Netflix subscription. There is something about the samurai movie that resonates with me, much like spaghetti westerns. In my mind, they are very similar mediums for study of characters in conflict. Nothing brings the drama to a head than the flash-bang of a sixshooter or the slash of a katana. And in a samurai or western, the audience suspends disbelief to accept that someone needs to die. There has to be a duel. The interesting question is why and how? Why would our hero, who is good (or at least trying to be good) forced to cut down these villains?

I guess part of the draw of many of these movies have for me is that I am fascinated by the very singular drive of the protagonists. This isn't to imply that they are all simple characters, but many stories revolve around a singular obsession to succeed despite all obstacles, whether the motivation is revenge or honor or....well that's about it for motivations in samurai movies. These movies skip all the trivial backstories and are pared down to the central conflict, the raison d'être, the quest. Beyond that, unlike many populist movies today where bad things happen to normal people and through survival they grow and become great, the samurai hero isn't normal, he doens't just survive. Hiroshi Ignaki's Samurai Trilogy is a great example I saw recently. The hero Musashi Miyamoto is born great and the audience knows it. His quest is to be a bad-ass and cut down rivals until everyone, including he himself recognizes he is the greatest swordsman in Japan. So Musashi rejects romantic love of several women. He rejects status, wealth and gainful employment of the shogun. He rejects all that distracts him from his training, meditating, and hacking people down. I admire his certainty and resolution. I think that's kinda what it takes to be an investment banker minus the rejection of wealth and gainful employment.

We've been talking about ranking the various B-schools based upon the coolness of the gifts they give out to admitted students. Yesterday as a joke I told Paul that if I ran my own B-school, I'd give out swords as gifts to admitted students. (He of course said he would give out keys to Ferrari's. I'd send my kids to his school. Definitely. Swords?). In a funny metaphor aren't B-schools kinda like fencing finishing schools for future corporate samurais?

Anyway, I'm very happy and relieved to have been accepted at one of the four schools I applied to. Denied at HBS and Kellogg after interviews. Wharton didn't bother to give me an interview. I think i'll write about interviewing and interviewing advice at a later date. More later on the quest for truth and certainty: Consulting or Banking?

Back to studying for the CFA exam this June. Man, cause these days an MBA just isn't enough.

Leadership

2007-03-30T11:18:00.000-07:00

Kim Clark, ex-Dean of HBS, talks to Charlie Rose about what Harvard views as "Leadership." (starts at minute mark 15)
Click Here for the Video

I wish I saw this video before I started writing my Harvard applications. He has some really good points on what a leader embodies:

Leaders recognize values - character matters.
Leaders are people who have a knack for getting things done through other people. Empathy, teamwork.
Leaders have spark, creativity, are not afraid to do something unusual, and have the ability to get it done.
Leaders instill passion in people, a sense of purpose. Leaders inspire people to maximize their potentials to reach that purpose.

Other words of wisdom:

The most important work you do in your life is within the walls of your home.
Take the professor, not the course.

What are your thoughts about "leadership?" Please post your comments.

Alan H.'s Admission Results

2007-03-28T17:54:00.000-07:00

While Stanford's admit announcements are still days away, my MBA application process is essentially finished. Stanford's answer regarding my application came in the form of not offering me an interview. That being said, I think I did reasonably well. Here are my results:

Round 1:
HBS - Reject w/o interview

Round 2:
Kellogg - Accepted
UCLA Anderson - Accepted
Wharton - Waitlisted
Stanford - Rejected w/o interview

I'm leaning heavily towards Kellogg at the moment.

Maintain Your Network!

2007-03-27T17:06:00.000-07:00

Like most MBA students, one of my primary objectives is to build my personal and professional network. However, when I was entering undergrad as an 18 year old, I had no idea what it meant to network and the usefulness of building a network. One barrier to my appreciation of networking is that the term carries a lot of negative baggage. I was used to people confusing networking with nepotism, telling stories of unqualified people getting ahead unfairly because they knew someone in a high position. But, even with this definition, the people that I knew the best were all in low positions, unable to help me, so why "network"? After 3.5 years of working, I've started to shed my old stigmas about "networking" and develop a better understanding of what it means. Reading the Harvard Business Review article, "How Leaders Create and Use Networks", helped improve my understanding. Here are some excerpts:

... we’ve found that networking—creating a fabric of personal contacts who will provide support, feedback, insight, resources, and information—is simultaneously one of the most self-evident and one of the most dreaded developmental challenges that aspiring leaders must address.
Their discomfort is understandable. Typically, managers rise through the ranks by dint of a strong command of the technical elements of their jobs and a nose-to-the-grindstone focus on accomplishing their teams’ objectives. When challenged to move beyond their functional specialties and address strategic issues facing the overall business, many managers do not immediately grasp that this will involve relational—not analytical—tasks. Nor do they easily understand that exchanges and interactions with a diverse array of current and potential stakeholders are not distractions from their “real work” but are actually at the heart of their new leadership roles.

The authors name three types of networks: Operational - useful for getting everyday tasks at work done; Personal - useful for speeding personal and professional development; Strategic - useful for figuring out future objectives and priorities, as well as getting support for them. They go on to describe the importance of networking and the power of strategic networks:

What differentiates a leader from a manager, research tells us, is the ability to figure out where to go and to enlist the people and groups necessary to get there. Recruiting stakeholders, lining up allies and sympathizers, diagnosing the political landscape, and brokering conversations among unconnected parties are all part of a leader’s job. As they step up to the leadership transition, some managers accept their growing dependence on others and seek to transform it into mutual influence. Others dismiss such work as “political” and, as a result, undermine their ability to advance their goals.
...
The key to a good strategic network is leverage: the ability to marshal information, support, and resources from one sector of a network to achieve results in another. Strategic networkers use indirect influence, convincing one person in the network to get someone else, who is not in the network, to take a needed action. Moreover, strategic networkers don’t just influence their relational environment; they shape it in their own image by moving and hiring subordinates, changing suppliers and sources of financing, lobbying to place allies in peer positions, and even restructuring their boards to create networks favorable to their business goals ...

Strategic networking can be difficult for emerging leaders because it absorbs a significant amount of the time and energy that managers usually devote to meeting their many operational demands. This is one reason why many managers drop their strategic networking precisely when they need it most: when their units are in trouble and only outside support can rescue them. The trick is not to hide in the operational network but to develop it into a more strategic one.

In searching the HBR website, I also found another article, "How to Build Your Network". I can't access this one with my subscription, so I plan to check it out at the library. Here's an interesting excerpt that discusses networks as channels through which information and ideas travel, the pillar upon which the "marketplace of ideas" is built:

Networks determine which ideas become breakthroughs, which new drugs are prescribed, which farmers cultivate pest-resistant crops, and which R&D engineers make the most high-impact discoveries. In a monumental 1998 study of innovations in science, art, and philosophy, sociologist Randall Collins of the University of Pennsylvania showed that breakthroughs from icons such as the seven sages of antiquity, Freud, Picasso, Watson and Crick, and Pythagoras were the consequence of a particular type of personal network that prompted exceptional individual creativity. In fact, Collins could find only three exceptions in all of recorded history: Taoist metaphysician Wang Chung, Zen spiritualist Bassui Tokusho, and the Arabic philosopher Ibn Khaldun.

This brings to mind something that I learned in a decision processes class, that the value of a piece of information lies in its propensity to change your mind about something. Thus, one important part of networking is to obtain new ideas and information. I recall many discussions I've had with a close friend who is a computer engineer where I learned a tremendous amount from the new perspective that he provided on a situation. But, in order to benefit from networking in this way, one must step out of his/her comfort zone of networking with people outside of his/her profession/gender/race/etc.

With all of that said, one of my goals for 2007 is to become better at growing the size of my network, expanding its breadth, and maintaining my existing network.

References:

"How Leaders Create and Use Networks", by Herminia Ibarra and Mark Hunter, published in HBR 01/07 issue
"How to Build Your Network", by Brian Uzzi and Sharon Dunlap, published in HBR 12/05 issue

Comparison of Wharton vs. Kellogg II

2007-03-27T10:53:00.000-07:00

From my personal experiences thus far with each school's admissions process, it has been night and day. Wharton has been extremely professional and efficient, and it has fully utilized its ApplyYourself system to denote date and time of when my application was submitted (1-3-07), when it was printed/reviewed (1-22-07), when I was offered an interview (2-12-07), and the final outcome (3-22-07). Most impressively, the admissions officer Carol Chu called me at 12 noon, sharp. The Wharton website said they will release decisions at noon, but I didn't expect it to be right on the dot. Alan said that's the Wharton way. He should know, he went there for undergrad.

On the other hand, Kellogg, has been very slow in processing my applications, and it even failed to retrieve my applications from the Embark system until I called and inquired about it. The admissions officer said the Embark system failed to notify Kellogg that my applications were complete and ready to review, even though I submitted everything on time (1-5-07). They did promise to review my applications right away, but the fact that they are reviewing it on 3-16-07, more than a month after they had already reviewed other Round 2 applicants' applications, has essentially put me into consideration for Round 3 where scholarships are not offered. More gripe, although Kellogg has promised to render me a decision by its deadline (3-26-07), it still have not contacted me with the results.

At this point, Wharton > Kellogg.

Comparison of Wharton vs. Kellogg

2007-03-25T20:41:00.000-07:00

Crouching Kellogg, Hidden Wharton
published in 9/15/03 issues of the Wharton Journal and the Kellogg Merger

This is a great interview with a British couple, the husband attended Wharton and the wife Kellogg, regarding the differences of each schools. What makes it unique is that they spent considerable amounts of time at each other's schools. Below are what I found to be the most insightful portions of the interview.

On the Importance that Each Administration Places on Teaching:

CHRIS: We have the same. We don't have an acronym, but at the end
of a course there will be 6 criteria, and the entire class rates professor on these dimensions. The professor is given a score, ranging from 1-4, 3-3.5 being on the high end. It's tough to get a 4. However, one professor who got 4.0 ratings, even though they'd never seen any other professor with such a high score, recently went off to another school, because they didn't think his research was what they wanted.

MAYA: I've spoken to professors who feel TCEs (teacher course evaluations) are a big differentiator for Kellogg. Because TCEs are factored into tenure decisions, many professors adopt an open door policy, so students can drop by whenever you want. A friend who teaches strategy says that you can't concentrate on work, as students in and out all day long, but it's great because of relationships engendered with students.

Alan's note: I think the professor that Chris references taught the Speculative Markets class that I took (derivative financial instruments: options and futures). He was, by far, the best Finance professor that I had at Wharton.

On the Downside of Kellogg's Team Culture:

MAYA: All has been as expected for all the good stuff which is why I came here. Negative surprises have been more reality checks on certain issues. Like the fact that the downside to a school where people are phenomenally involved, things are student run, teamy, and everyone is helpful, is that there is a certain amount of groupthink that is difficult to break through. I love being at a school with such a strong, cohesive culture, but the element of thought-police is something that I found less appealing and surprising.

On Wharton's Quant Reputation:

CHRIS: It's more about the attitude of a lot of people here: assuming that if something is not quantitatively argued it's complete mush. People forget there are other forms of logic, like you've got in an essay, or determined by things like business acumen, political savvy. I think people here fall in love with their spreadsheets too much, which is good if you go into banking or consulting for one or two years out of school, but if you're going to lead a large team, other skills are needed.

Alan's note: When asked about the Wharton MBA students, my Statistics class's teaching assistant said that quite a few of the MBAs wrote essays on their exams, rather than showing an equation as their answer. So I guess that would suggest that not everyone at Wharton assumes that non-quantitative arguments are mush! (or they didn't study hard enough)

How I studied for the GMAT

2007-03-25T08:30:00.000-07:00

Commitment

To prepare for it, I spent six months "studying". For three of those months, I pretended to study. I did practice problems for a couple hours on weekends until I got bored. The next two months, I studied intently prior to taking my first test, missing my intended score due to nervousness. In the month following my first test, I continued studying with greater intensity. Six months of preparation and $500 in test fees later, I finally earned the score that I wanted.

A few months later, a friend took it after studying for only two months and scored higher than I did.

In the end, I could have easily avoided three months of having the GMAT hanging over my head by fully committing to studying for two or three months. However, since I only bought GMAT study books, I still spent $1,000 less than people who took a GMAT class. I suppose that gives me some consolation.

Study Methods

If you go onto some MBA application process discussion forums on the web, you'll find some people who have devised some pretty extreme study strategies. I came across an Indian guy who posted a detailed 6-month study plan involving 10,000 practice problems. Other people pay $1,200 for testing classes. My friends and I studied from books and all scored above 700 - cheap and straightforward. I have no doubt that classes are helpful, but I think justifying your decision to take a class by saying, "I just don't have the discipline to study on my own," is a good way to set yourself up to waste your money. There is no way around spending hours and hours on practice problems.

The three books I used were:

Princeton Review - Test-taking strategy
Kaplan - Quantitative review
GMAT Official Study Guide - Practice problems from old GMATs

The most helpful were the Princeton Review for testing strategies and refreshers on the verbal and quant methods, and the GMAT Official Study Guide for problems. I went through the GMAT Official Guide twice. Because the material on the GMAT is relatively simple, the Kaplan book mimics Princeton Review's review on the material, adding little more than practice problems.

However, the Kaplan and Princeton Review books come with practice test CDs. These are incredibly useful, since a computer adaptive test can't be simulated with a book. Each book comes with 3 tests. In addition to the 2 practice tests provided on the GMAC website, this gives you 8 tests in total. In my final 4 weeks of studying, I took two practice test per weekend. The GMAC tests are your best approximations of what the real test will be like, so I took one of those tests during each of the last 2 weekends prior to my real test.

Related:
Interesting analysis of the books by an Amazon.Com Reviewer (see user reviews)

How to think about the GMAT

2007-03-24T10:56:00.000-07:00

The GMAT is an interesting animal.

As taking it is a first step in the MBA application process, it is easy to let it become a mental barrier, as I did.

After reading the opinions of admisssions committees (adcoms) from different schools, I've come to think about it as a minimum hurdle. By clearing that hurdle, it simply indicates to the adcoms that one is mentally capable of learning the class material presented in their curricula. Once that hurdle is cleared, the real application process begins.

In my mind, the hurdle for the top ten MBA programs is 700. Yes, the average GMAT scores for those programs are between 690 and 715, suggesting that half of the people accepted score lower. However, this is one variable that you can immediately control in the short-term, unlike your work and volunteer experiences. So why not control it?

After you surpass 700, the benefit of re-taking the test to score slightly higher becomes extremely incremental. Some schools may put a heavier emphasis on it, offering grant money to candidates with scores above a certain threshold. In terms of schools rankings, raising its incoming class's average GMAT score is one easy way for a school to improve its ranking. For schools that dominate the rankings - such as Harvard, Stanford and Wharton - I don't think that a score of a 700 versus a 720 will make all that huge of a difference to the adcom.

Related:
How did I study for the GMAT?