Finance went well today. I and Gong Ping, my Chinese classmate, finished first so we spent some time playing ping pong before studying for tomorrow's Strategy exam. He is much more accomplished than I at ping pong (He's been playing since he was 3!) so he coached me on my forehand smashes. It was very helpful and I appreciate his willingness to work with me instead of just beating me mercilessly. The spirit of collaboration at IMD extends all way to recreational sports!
Now I am wading through 100+ pages of a Strategy case (plus supporting materials) in preparation for tomorrow's Strategy exam. The case, unfortunately, was written at Harvard Business School. We have noticed all year that HBS cases tend to be much, much longer than IMD cases, requiring much more time to read and much more focus to distill out the relevant details. No wonder it takes American programs two years to finish an MBA!
Showing posts with label Finance. Show all posts
Showing posts with label Finance. Show all posts
2008-06-04
2008-06-03
Stewart Hamilton is a Bad, Bad Man
Our Accounting professor led us to believe for the past several weeks that today's Accounting exam would not require us to put together balance sheets or profit & loss statements for corporations with numerous, complex transactions, which we had to do in the Mod I Accounting exam. Consequently, no one studied balance sheets or profit & loss statements for this exam.
You can imagine our shock and dismay when we opened up today's Accounting exam booklet to find a problem that A. required us to produce a balance sheet and profit & loss statement B. featured some of the most complex transactions we have seen all year, and C. was worth 25% of the total exam grade! Oh Stewart, you codger; just as we thought you were softening up, it turns out that you were just lulling us into a false sense of security. Even his assistant was in on the gag; a few weeks ago she held a review session, dressed in provocative attire (trying to distract us from the danger that lay ahead!), and told us that the only document we would need to assemble on the exam was a cashflow statement. No wonder so many students failed the exam last year!
When I first saw the problem, I was mortified. I hadn't studied that material and the problem setup was daunting. My MP3 player had just switched to Mozart's Requiem in D--how fitting. I decided to skip it and come back to it at the end, lest it bog me down and affect the rest of my exam. The other problems were challenging but I felt confident in my answers. As the clock continued to tick, all I had left standing in the way of being done with Accounting forever was this one Devil problem.
I couldn't remember exactly the methodology I was supposed to use to work through it so I just reasoned my way along. And, after some time . . . it was my most successful solution for such a problem all year. My balance sheet balanced on the first go-round and the P&L fit right in. That helped quell the anger I was initially feeling toward Stewart. Plus, I suppose you can't blame an Accounting professor for putting something so fundamental to Accounting on his final exam. Perhaps it was an intentional lesson on planning for the unexpected.
The victory over the unexpected challenge was a good note on which to end my Accounting "career." Next up: Finance. Arturo claims that the exam is exclusively about options but, now that we've been stung by Stewart, we're all refreshing ourselves on capital structure, discounted cashflow forecasts, and CAPM. We'll just see if our other professors are in on it too!
You can imagine our shock and dismay when we opened up today's Accounting exam booklet to find a problem that A. required us to produce a balance sheet and profit & loss statement B. featured some of the most complex transactions we have seen all year, and C. was worth 25% of the total exam grade! Oh Stewart, you codger; just as we thought you were softening up, it turns out that you were just lulling us into a false sense of security. Even his assistant was in on the gag; a few weeks ago she held a review session, dressed in provocative attire (trying to distract us from the danger that lay ahead!), and told us that the only document we would need to assemble on the exam was a cashflow statement. No wonder so many students failed the exam last year!
When I first saw the problem, I was mortified. I hadn't studied that material and the problem setup was daunting. My MP3 player had just switched to Mozart's Requiem in D--how fitting. I decided to skip it and come back to it at the end, lest it bog me down and affect the rest of my exam. The other problems were challenging but I felt confident in my answers. As the clock continued to tick, all I had left standing in the way of being done with Accounting forever was this one Devil problem.
I couldn't remember exactly the methodology I was supposed to use to work through it so I just reasoned my way along. And, after some time . . . it was my most successful solution for such a problem all year. My balance sheet balanced on the first go-round and the P&L fit right in. That helped quell the anger I was initially feeling toward Stewart. Plus, I suppose you can't blame an Accounting professor for putting something so fundamental to Accounting on his final exam. Perhaps it was an intentional lesson on planning for the unexpected.
The victory over the unexpected challenge was a good note on which to end my Accounting "career." Next up: Finance. Arturo claims that the exam is exclusively about options but, now that we've been stung by Stewart, we're all refreshing ourselves on capital structure, discounted cashflow forecasts, and CAPM. We'll just see if our other professors are in on it too!
2008-06-02
Bring on the Exams!
This weekend was pleasant and relaxing. I took care of many chores, wrote some papers, and, most importantly, played some beach volleyball. On Saturday our play was cut short by a scary storm that rolled in out of nowhere: very low, very dark clouds, high winds, and lots of lightning. No problem, though; we ran and took refuge in a nearby sailing club, where we had drinks and waited out the storm. The sunset after the storm was brilliant; pictures are in my facebook album. Sunday there weren't many people at the courts, which was no problem for me and Tomas. We were able to play for about two hours straight before returning to our studies.
On another, extremely positive note, the mighty Rice Owls baseball team defeated Sam Houston State, St. John's, and UT (the most gratifying) to advance to the Super Regional tournament of the College World Series. To see what a blast we had at last year's Super Regional and why I miss Rice baseball so much, check out my album. Looking at those pictures again brings a smile to my face.
We have today off to prepare for our four days of exams: Accounting, Finance, Strategy, and IPE. Today will mostly focus on Accounting preparation with some Finance mixed in as well. Strategy will be a case-based exam so not much preparation is possible until Wednesday evening, when we receive the case. The IPE exam will involve taking and defending a stance on a major world issue, citing evidence from disparate regions. It is open book/notes/Internet so, again, there isn't much preparation I can do in advance.
The weather looks great today--not bad for beach volleyball! No, bad Bryan! Focus, focus . . .
On another, extremely positive note, the mighty Rice Owls baseball team defeated Sam Houston State, St. John's, and UT (the most gratifying) to advance to the Super Regional tournament of the College World Series. To see what a blast we had at last year's Super Regional and why I miss Rice baseball so much, check out my album. Looking at those pictures again brings a smile to my face.
We have today off to prepare for our four days of exams: Accounting, Finance, Strategy, and IPE. Today will mostly focus on Accounting preparation with some Finance mixed in as well. Strategy will be a case-based exam so not much preparation is possible until Wednesday evening, when we receive the case. The IPE exam will involve taking and defending a stance on a major world issue, citing evidence from disparate regions. It is open book/notes/Internet so, again, there isn't much preparation I can do in advance.
The weather looks great today--not bad for beach volleyball! No, bad Bryan! Focus, focus . . .
2008-05-27
The Irrationalities of Negotiation
Today we conducted another acquisition simulation, for Finance this time. Our last simulation, for Strategy, was computerized and was built around realizing synergies between the two organizations and generating buy-in from stakeholders on both sides (and external). Today's simulation was a negotiation between Nestle and Rowntree, a UK-based chocolatier. Our 12 study groups were divided up evenly, half representing the acquiror and half the acquiree.
Last night we submitted our position to a neutral party: which operational/organizational issues were important for us, who we thought had the most bargaining leverage, what our target price was, and what our walk-away price was. The objective was to propose a win-win deal in which both sides ceded some points and came out better in the long run. My group represented Rowntree.
This morning we met with our paired Nestle group and got down to business. We both agreed that we were working toward the same goal and the meeting began very congenially. We compromised and came to agreements on layoffs, organizational structure, branding, and distribution with no problem. However, once the discussion turned to price, the attitudes of both sides soured.
It has been impressive to me how consistently, in every negotiation we have done, no matter how genuine the desire for collaboration is, irrationality and defensiveness play strong roles. Someone will invariably say something inflammatory. This causes the other group to put up its defenses and soon the two groups are "at war" with each other. In this case it came down to the last minute for us. We were bickering over a gap of 25 pence per share. The price was well above my group's walk-away price and below the other group's walk-away price. We had agreed on every other aspect of the deal. In short, rationally everyone in the room was prepared to accept the terms on the table but no one's ego wanted to give up that final 25 pence--or even meet in the middle.
At the last second, as we were being called into class and it looked like no deal would happen. I offered my hand to the other group's chief negotiator and accepted their terms. I had no authority to do so, but my group went along with it because rationally they knew it was the smart choice. I couldn't believe how emotions had almost killed a good deal over 25 pence!
The real learning came in class during the debrief. Only half of our groups had reached agreements despite every single one of them having entered negotiations with enough common ground (as illustrated by the positions they submitted last night) to do a deal. One group failed to close based on a difference of 10 pence even though all their other terms were in place--and I thought our 25-pence difference seemed trivial!
The exercise and the debrief were valuable. If there is one thing we have learned at IMD it is that human beings behave irrationally, especially when under stress. Human beings lead and represent organizations (companies, departments, even countries), giving these organizations a sort of collective irrationality. Slowly but surely we are learning to anticipate and identify irrational behavior in ourselves and in others, enabling us to detach from strong situations and make rational decisions. Here at IMD we have the opportunity to test out such skills in a consequence-free environment such that we are more prepared to do the right thing when billions of dollars, the future of an organization, or even human lives are on the line. Real world, real learning.
Last night we submitted our position to a neutral party: which operational/organizational issues were important for us, who we thought had the most bargaining leverage, what our target price was, and what our walk-away price was. The objective was to propose a win-win deal in which both sides ceded some points and came out better in the long run. My group represented Rowntree.
This morning we met with our paired Nestle group and got down to business. We both agreed that we were working toward the same goal and the meeting began very congenially. We compromised and came to agreements on layoffs, organizational structure, branding, and distribution with no problem. However, once the discussion turned to price, the attitudes of both sides soured.
It has been impressive to me how consistently, in every negotiation we have done, no matter how genuine the desire for collaboration is, irrationality and defensiveness play strong roles. Someone will invariably say something inflammatory. This causes the other group to put up its defenses and soon the two groups are "at war" with each other. In this case it came down to the last minute for us. We were bickering over a gap of 25 pence per share. The price was well above my group's walk-away price and below the other group's walk-away price. We had agreed on every other aspect of the deal. In short, rationally everyone in the room was prepared to accept the terms on the table but no one's ego wanted to give up that final 25 pence--or even meet in the middle.
At the last second, as we were being called into class and it looked like no deal would happen. I offered my hand to the other group's chief negotiator and accepted their terms. I had no authority to do so, but my group went along with it because rationally they knew it was the smart choice. I couldn't believe how emotions had almost killed a good deal over 25 pence!
The real learning came in class during the debrief. Only half of our groups had reached agreements despite every single one of them having entered negotiations with enough common ground (as illustrated by the positions they submitted last night) to do a deal. One group failed to close based on a difference of 10 pence even though all their other terms were in place--and I thought our 25-pence difference seemed trivial!
The exercise and the debrief were valuable. If there is one thing we have learned at IMD it is that human beings behave irrationally, especially when under stress. Human beings lead and represent organizations (companies, departments, even countries), giving these organizations a sort of collective irrationality. Slowly but surely we are learning to anticipate and identify irrational behavior in ourselves and in others, enabling us to detach from strong situations and make rational decisions. Here at IMD we have the opportunity to test out such skills in a consequence-free environment such that we are more prepared to do the right thing when billions of dollars, the future of an organization, or even human lives are on the line. Real world, real learning.
2008-05-07
Today was another great day!
Arturo correctly identified T2 as the "best movie ever" in Finance this morning. I can't think of a better way to learn about real options. Strategy was very interesting this afternoon as well. We covered strategies for multi-business corporate entities: how many businesses can a conglomerate reasonably manage and which ones should it keep/grow/divest? These are issues I never considered in the software startup world! I love this school.
On another note, my train for Paris leaves in 8 hours--vive la france!
On another note, my train for Paris leaves in 8 hours--vive la france!
2008-04-02
Yay, Sports!
Although I should really be studying for Finance, I must pause and say a few words about my favorite sports teams. Today I wore an old Washington Redskins t-shirt, which reminded me that I still haven't posted about Art Monk. Monk was an amazing possession receiver for the late-80's/early 90's Redskins dynasty. He wasn't the fastest receiver in the NFL, but he was the guy you wanted on your side of the ball when it was third down. Besides, the Skins had Gary Clark and Ricky Sanders, the rest of "the Posse," for speed.
What impressed me most about Monk wasn't his playing ability; it was his class. On and off the field he was a stand-up guy in every respect. I had the opportunity to spend a little time with him at his football camps when I was growing up and I can't think of a better role model for young athletes.
Earlier this year, Art Monk was elected into the NFL Football Hall of Fame. Darrell Green, another Redskin, spent nearly two decades as the NFL's fastest man and was elected into the shrine this year as well. Although IMD is very different from the NFL Hall of Fame, I'm proud that come December I will share the distinction of "Class of 2008" with them. Congratulations, Art and Darrell and HAIL TO THE REDSKINS!
Now, on to matters of more immediate importance: Rice Baseball! My poor Owls have been struggling this season. Last weekend they broke their 40-series home win streak and this week their ranking fell to #12. That's OK, though; I'm sure they're just working the kinks out early in the season. And as you will recall from my earlier post, I'm happy as long as we beat Texas. Still, I wore a Rice Baseball National Championship t-shirt on Monday as a long-distance show of support. It worked; last night Rice beat UT in front of an Austin crowd of 6,511. I wish I could have been there--and on 6th Street afterward! Stand, cheer, DRINK MORE BEER! Go, go, GOOOOOOOO Rice!
What impressed me most about Monk wasn't his playing ability; it was his class. On and off the field he was a stand-up guy in every respect. I had the opportunity to spend a little time with him at his football camps when I was growing up and I can't think of a better role model for young athletes.
Earlier this year, Art Monk was elected into the NFL Football Hall of Fame. Darrell Green, another Redskin, spent nearly two decades as the NFL's fastest man and was elected into the shrine this year as well. Although IMD is very different from the NFL Hall of Fame, I'm proud that come December I will share the distinction of "Class of 2008" with them. Congratulations, Art and Darrell and HAIL TO THE REDSKINS!
Now, on to matters of more immediate importance: Rice Baseball! My poor Owls have been struggling this season. Last weekend they broke their 40-series home win streak and this week their ranking fell to #12. That's OK, though; I'm sure they're just working the kinks out early in the season. And as you will recall from my earlier post, I'm happy as long as we beat Texas. Still, I wore a Rice Baseball National Championship t-shirt on Monday as a long-distance show of support. It worked; last night Rice beat UT in front of an Austin crowd of 6,511. I wish I could have been there--and on 6th Street afterward! Stand, cheer, DRINK MORE BEER! Go, go, GOOOOOOOO Rice!
2008-03-10
Finance meets Motown
Canadian professor Jim Ellert is our other Finance professor. Apparently he has a penchant for Motown music. We're on break right now between sessions on dividend policy and he is showing us old videos from the Apollo Theater in Harlem to pick up our energy levels. Awesome.
2008-03-05
It's Snowing!!!!
As it has been so sunny and warm the past few weeks, you can imagine my surprise when I woke up this morning to . . . SNOW! As is my usual routine, I opened my curtains to see how the mountains looked as the sun began peeking up over the horizon. However, there was no sun and there were no mountains. Instead there was limited visibility and a lot of white stuff flying around. Having lived in Houston for the past 10 years, I had almost forgotten what it looked like, but there was no mistaking it; it was snowing.
Although the sun eventually made a foreceful appearance, preventing any snow from really sticking, the flurries were beautiful and lasted well into the afternoon. While I would have preferred to take the opportunity to practice eXtreme Ping Pong, IMD's class schedule had plenty to offer as well. Last week's end of Industry and Company Analysis / Economics gave way to a new class, which started today: Innovation and Product Design. Taught by American professor David Robertson, this course is all about innovation at every level of an organization: product, process, business model, etc. Its goals are two-fold: 1. to teach us how to innovate ourselves, and 2. to teach us how to manage innovation and create a corporate culture that fosters creativity. Our first class was very interesting and focused on individual class members' experiences in innovation/design. We won't meet again for a while but come April we will begin competing in a school-wide innovation competition--fun!
This afternoon featured an interesting Finance class. Instead of sitting in the amphitheater trying to absorb formula after formula, we took part in a team-based exercise. Half of our study groups were companies seeking debt financing while the other half were banks looking to lend. Each bank was set up with a company and was given a time limit to reach a deal that worked well for both parties. If no such deal was reached, companies could go to the market and see if other banks would offer them more favorable terms.
My group (bbb7) was paired with our nextdoor neighbors (Magic 8), who were prepared, reasonable, and committed to finding a mutually agreeable deal. Although our ultimate loan package was a little unorthodox, both parties were happy with the terms by the end of the day. We celebrated together with shots of Slovakian liqueur and headed home to rest up before tomorrow's Integrative Exercise.
Pictures of both snow and deal celebration are in my March FaceBook album.
Although the sun eventually made a foreceful appearance, preventing any snow from really sticking, the flurries were beautiful and lasted well into the afternoon. While I would have preferred to take the opportunity to practice eXtreme Ping Pong, IMD's class schedule had plenty to offer as well. Last week's end of Industry and Company Analysis / Economics gave way to a new class, which started today: Innovation and Product Design. Taught by American professor David Robertson, this course is all about innovation at every level of an organization: product, process, business model, etc. Its goals are two-fold: 1. to teach us how to innovate ourselves, and 2. to teach us how to manage innovation and create a corporate culture that fosters creativity. Our first class was very interesting and focused on individual class members' experiences in innovation/design. We won't meet again for a while but come April we will begin competing in a school-wide innovation competition--fun!
This afternoon featured an interesting Finance class. Instead of sitting in the amphitheater trying to absorb formula after formula, we took part in a team-based exercise. Half of our study groups were companies seeking debt financing while the other half were banks looking to lend. Each bank was set up with a company and was given a time limit to reach a deal that worked well for both parties. If no such deal was reached, companies could go to the market and see if other banks would offer them more favorable terms.
My group (bbb7) was paired with our nextdoor neighbors (Magic 8), who were prepared, reasonable, and committed to finding a mutually agreeable deal. Although our ultimate loan package was a little unorthodox, both parties were happy with the terms by the end of the day. We celebrated together with shots of Slovakian liqueur and headed home to rest up before tomorrow's Integrative Exercise.
Pictures of both snow and deal celebration are in my March FaceBook album.
2008-02-23
Finance
It's a beautiful day here in Lausanne: sunny and 50 degrees F. Naturally we're stuck indoors in Finance class all day! But things could be worse. Professor Arturo Bris has made engaging what is usually considered a dry subject. As we wade through CAPM, IRR, and NPV, Arturo's simple, humorous presentation style renders key concepts approachable. As someone who is pretty quantitative by nature, I enjoy this class as it adds substance to "risk" and "value," which I had previously regarded as just buzz words. Arturo's best quality by far, though, is that he has referred to himself as the Terminator on multiple occasions--not bad for a skinny Spaniard!
2008-02-20
Crazy Aussies
On Monday I realized that the Opera de Laussane would be presenting La Bohème this weekend and this weekend only. How could I miss such an opportunity to break free of the IMD dungeons?
I sent out a feeler email to the rest of the class to see if anyone else was interested. It came as no surprise that I received several positive responses from interested parties and, in fact, some responses from students who already had tickets. What did come as a surprise, however, was this email from Lucy, an Australian student with a petroleum engineering background:
"argh - [can't make it. However] I'm in for Carmen in May - the last time I sat down and listened to it in its entirety was at about 3am working night-shift with a bunch of crazy Norwegian riggers off the north west coast of Africa . . ."
I love it. Reason # 8,264,921 to come to IMD: rubbing shoulders with people like Lucy.
Now I can't wait for Friday's performance. Then Saturday will be cigars and Scotch/Cognac/Port with students and alumni at the 5-star Beau-Rivage Palace. This may be the closest I come all year to the post-wine-dinner environment of the Petroleum Club of Houston. What better way to relax after 9.5 hours of Finance on Saturday? Fortunately the IMD Cigar Club is a standing tradition so there will be more opportunities to partake.
I sent out a feeler email to the rest of the class to see if anyone else was interested. It came as no surprise that I received several positive responses from interested parties and, in fact, some responses from students who already had tickets. What did come as a surprise, however, was this email from Lucy, an Australian student with a petroleum engineering background:
"argh - [can't make it. However] I'm in for Carmen in May - the last time I sat down and listened to it in its entirety was at about 3am working night-shift with a bunch of crazy Norwegian riggers off the north west coast of Africa . . ."
I love it. Reason # 8,264,921 to come to IMD: rubbing shoulders with people like Lucy.
Now I can't wait for Friday's performance. Then Saturday will be cigars and Scotch/Cognac/Port with students and alumni at the 5-star Beau-Rivage Palace. This may be the closest I come all year to the post-wine-dinner environment of the Petroleum Club of Houston. What better way to relax after 9.5 hours of Finance on Saturday? Fortunately the IMD Cigar Club is a standing tradition so there will be more opportunities to partake.
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