Thursday, December 16, 2010

Witness the Invention of Capitalism - The MBA Show Episode 14



While they are away on vacation Tom and Miro dig through The MBA Show archive to present great moments in business history. This week: a trip to 1776 for the invention of Capitalism.


Headlines: Adam Smith: The Wealth of Nations

I do say, my dear fellow, that I expect this to change business in a big way.

Tom: Could you start out by explaining how business works right now?

Here’s how business works now.
1. Be rich
2. Get a boat from the king to transport goods
3. Profit

So what does this change?

The main thing that changes is step number 2. Instead of renting your boat from the queen, you would get together with your rich buddies and buy your own boat.

So won’t there be boats everywhere? we’ll have too many boats.

No, we’ll have the optimal number of boats.

I don’t understand?

Have you read the book?

Read? You know I’m not literate. Just tell me the main take-aways.

So the basic idea is this:

If you let the government allocate resources, you end up with a non-optimal distribution of capital. Instead, if you do nothing, and allow people to compete over resources among one another, then you will arrive at a more efficient distribution of capital.

So you’re saying it’s a bad thing? Any idiot can make money by having a good idea, even if they don’t start out rich? I don’t like the sound of that at all.

The only way to make outsized returns is to do things more efficiently.

BREAKING NEWS:

Just signed the declaration of [What?!] Oh I don’t like the sound of that? Ah, it’ll probably amount to nothing.
Posted by Miro at 2:30 PM 22 comments

Thursday, December 9, 2010

Wharton Gives Free Classes for Life | The MBA Show - Episode 13


The University of Pennsylvania Wharton School announces the biggest overhaul to its curriculum in 17 years.  Wharton will now be offering free continuing education classes to its graduates for life.  Miro explains the difference between "golden handcuffs" and a golden shower.  Tom reveals his plans to work at Goldman Sachs for 5 years and buy three swimming pools to match.


(1) Headlines: Wharton, biggest curriculum change in 17 years
  • Wharton changes it’s curriculum for the first time in 17 years


1. Most interesting things: Free School For Life
  • One free exec ed class to grads once every 7 years
  • One week intensive class for free open to grads every 7 years for life!!


Tom: Wow, the creepy alumni problem has been solved.  We all have that weird feeling when we run into 2010’s at MBA events. This is not what i want.  I’m a banker!  I have important things to do!  What I need is an online class that I can watch on one of my bloomberg screens.

Miro: Why is that better

Tom: My time is really valuable.  I don’t have time to fly all over creation and take a week off of work to shake hands with old buddies.  This is just an alumni reunion.  What I need is some up-to-date business information that will keep me sharp, and I’d rather get that from my Hampton's house, than have to leave my family for a week.

Miro: Value of your MBA is the network

Tom:  But I know who my friends are.  I can tell because they’re all wearing Hermes.

MIro: You talk to your friends, this is netowrking of 2nd level
    And Development is here getting the donation, that’s what makes this NPV positive.  Development will be all over this like ...

2. Biggest change for students: More Flexible Core .. Kinda
  • Going from a full year of everyone taking the same classes, to 4 shared classes and a choice of classes in six different areas where you have to take one class in each area


Tom: Oh, this is great.  Give the freedom to choose back to students.  Miro, you know I’m pro-choice.  I believe it’s the student’s right to choose.  It’s my education.  I should have the right to do what I want with it.  I was born wearing a suit vest.  I worked for three years at goldman.  The last thing I need, is an intro finance course.

Miro: But, Tom the value of these classes is having you in there to make these classes better. Having you in finance enhances the education of everyone. And when it comes to marketing, it’s my turn.
The reason you get an MBA is to be able to say to the world, that I have a broad range skills across every major domain in business. You hire me, you know what I will know.

Tom: you’re absolutely right Miro.  In fact, the entire point of using a cookie cutter is so that all your cookies come out exactly the same.  If anything, they should have gone even further.  A 5 class core would have been even better.

3. More coaching and experiential learning
  • Mandatory two-year leadership coaching (quarterly coaching + 360-feedback)
  • Classes in other countries.
    • Miro, Apparently Wharton figured out that you can’t teach leadership by just talking abut it. It take experiential learning and coaching.

Wait a minute.  I feel like I’ve heard this somewhere before. [What do you mean Tom?]

Flashback!  The MBA Show, Episode 10.  Cue low budget transition!

The MBA Show, episode 10

Pull out flashback of us from episode 10:

You know what this means Miro?  I think we all know what this means Tom.  The entire faculty at Wharton...

Together: Watch The MBA Show!!!!!

You’re welcome America.

So, Wharton went the right direction three times here.  (Continuing Ed., Flexible Core, Experiential Learning)  So I’d like to give them three thumbs up. Tom: two thumbs, Miro, third thumb.  [stall]

4) Jargon: Golden Handcuffs
Before we get started.  I just want to be clear that the term golden handcuffs has nothing to do with the fuzzy kind of handcuffs or the golden kind of showers.

Golden Handcuffs a term that people use to refer to the promise of money that keeps someone from leaving their job.

For example, when I’m five years into the job at Goldman and my mansion needs another swimming pool, it’s the million dollar bonus that I’ve got coming that prevents me from doing something foolish such as leave banking to do something with social value like teach high school.

Miro: And people usually use this to refer to high paying jobs seem like they would offer more flexibility, but you see this at start-up companies too. Stock Options that vest over time are that same promise of money in the future, that keeps you working hard and prevents you from leaving.

(4) Contest Announcements:

(5) Business School Tip of the Week:

PARTY

(6) We will be taking a vacation from the show for the next few weeks.  Join us at the start of next season.  In the interim, look for classic clips from The MBA Show.

We’re very exited: we went throught he archives and found some clips dating far back as the late late 1800s. It’s going to be great.

(7) What’s on your Radar?
  • Miro: The holiday parties begin.
  • Tom: Mystery Weekend
Posted by Tom Rose at 1:08 PM 12 comments

Thursday, December 2, 2010

The MBA Show Episode 12 - B-Schools Figure Out What Women Want




(0) CTA: iTunes

(1) Headlines: Business Schools Accepting Nerds

Miro: Kaplan surveyed 288 business schools and 39% now accept the GRE up from 24% last year. Some top schools accepting it include: HBS, Stanford, Columbia.
You know what this is about tom?
Tom: What?
Miro: getting more female applicants.

That’s what I’ve been doing wrong!  Ladies, TheRealTomRose is now accepting the GRE.  Aaand, that doesn’t make any sense at all.

So follow my convoluted logic here.  Its used to be that Bschools looked for 5 years experience.  But at 27, women are thinking about having kids soon, so the math for getting an MBA doesn’t make sense.  So to get women, schools need to go younger and that’s where you find the GRE.

So you think that the GRE is a weapon being used to get women applicants.

Yes. bababa

So let me see if I can summarize your point!  Damnit!  Is nothing sacred.  Is there no point place men have an unfair advantage anymore?  I want to pee standing up.  I want to get paid more for the same damn job.  And I want to get and MBA and look down through the glass celing as those baby crazed hippies and their GREs!  Is that your point?

My point is, If you want more women applicants you have to recruit younger.

So ETS isn’t just selling the GRE.  They’re selling a product bundle.  For one low fee, you get the GRE, an MBA and... a baby!


(2) MBAEI

We are announcing the first quantitative measure of MBA Exuberance, conducted by The MBA Show.  We are tracking across the country, how MBAs feel about their job prospects.  We asked people on a 0-100% scale how confident they are that they will receive a satisfactory job offer. (100% meaning they already have one. 0% meaning they are hoping to become a VC.)

Why does it matter how exuberant we are?

Well, we all know that MBAs really care about getting jobs.  But one thing they care about even more is whether their peers are getting jobs before they are.  

Well how do they feel?

The current number is 79.  Wooo hhooo celebrate:

Miro: [Taps tom] What does that mean

Tom: Could you imagine the disaster if it has been a suicidal 77?  Or the coked out euphoria of an 81.  

Miro: But how can you possibly distill all the emotion of the job search into a single number.

Tom: But isn’t it basically the job of an MBA to take an extremely complicated set of data and distill it down into a single meaningless value that can be presented to the Board of Directors.   

[Awkward pause, followed by laugh.]

One thing you really want to do here is compare the MBAEI against schools.  For example, Harvard students report an average MBAEI of a dismal 73 compared with Tuck students who report an average MBAEI of an exuberant 90.

So, we want to hear from you!  Visit www.thembashow.com and click on MBAEI to take the survey and add your data to the national results.


(3) Jargon: “HHI” - Herfindahl-Hirschman Index
http://www.justice.gov/atr/public/testimony/hhi.htm

HHI is a measure of market concentration.  You have heard about this in Econ class and Strategy class.  The number varies from 0 to 10,000.  10,000 is a high concentration market (monopoly), and 0 is a low concentration market (perfectly competitive).

So higher is better?  

Yes.  If you’re a business owner, you want to be in a highly concentrated market so that you can command higher prices.

But what if you’re a consumer?

Well that’s just rediculous..If you are a CONSUMER, you want a low-concentration market so that competition keeps prices down.  And in fact, people have heard about HHI because of anti-trust cases.  The feds use HHI to judge whether a merger will make a market too concentrated.

So the federal gov’t is deciding whether to prosecute based on a spreadsheet.

Yes.

And companies will run this on a merger to see whether they are stepping on any toes?

Yes. 100% of the time.  It’s like a pregnancy test.  If you think you might need to know, then you definitely need to know.

"HHI" means the Herfindahl-Hirschman Index, a commonly accepted measure of market concentration. It is calculated by squaring the market share of each firm competing in the market and then summing the resulting numbers.  For example, a market with only one firm would have an HHI of 10,000.  A market with tons of tiny firms might have an HHI of 50.

The HHI takes into account the relative size and distribution of the firms in a market and approaches zero when a market consists of a large number of firms of relatively equal size. The HHI increases both as the number of firms in the market decreases and as the disparity in size between those firms increases.

“Markets in which the HHI is in excess of 1800 points are considered to be concentrated.” Transactions that increase the HHI by more than 100 points in concentrated markets presumptively raise antitrust concerns under the Horizontal Merger Guidelines issued by the U.S. Department of Justice and the Federal Trade Commission. See Merger Guidelines § 1.51.

http://en.wikipedia.org/wiki/Herfindahl_index
A HHI index below 0.01 (or 100) indicates a highly competitive market.
A HHI index below 0.1 (or 1,000) indicates an unconcentrated market.
A HHI index between 0.1 to 0.18 (or 1,000 to 1,800) indicates moderate concentration.
A HHI index above 0.18 (above 1,800) indicates high concentration[1].


(4) Contest Announcements:
  • MIT $100K Executive Summary Competition - 2 page exec summary - due today at 6 pm at mit100k.org


(5) Business School Tip of the week:

Sleep

Scientists better understand the importance of sleep

Other: Did you hear that Yogi Bear Market?
One: Did you hear that Ben Bearnanke?
    • helps us consolidate and retain memories
    • 2 weeks of 6 hour sleep gives you the response time of someone legally drunk


(6) What's on your Radar
Miro: Holiday parties! Tazo chocolate tour.
Tom: EdCamp at Columbia
Posted by Tom Rose at 2:39 PM 23 comments
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