Five Things Learned In Business School

June 20, 2005

A VC: The Five Things I Learned In Business School:

I blog this like I might ever use it… can these things be parlayed into psychosocial economies?

“Here they are in no particular order:

1 – A dollar today is worth more than a dollar tomorrow. I knew about interest rates and such before I went to business school, but the concept of the time value of money and present values were foriegn to me until I got my MBA.

2 – You will make more money if you take more risk. I did not understand that there was an explicit relationship between risk taking and expected return before I went to business school. I do now :)

3 – You can value an asset if you know its cash flows, the timing of them, and can quantify the risks of acheiving those cash flows. The whole area of the capital asset pricing model and modern portfolio theory was my second favorite thing I learned at business school. It made sense to me and given my engineering background, I found the math around these theories fascinating. I don’t use the formulas very much any more, but my brain is now hard wired with these theories and I don’t think of value any other way and never will.

4 – Markets are made up of speculators and hedgers. You can’t have one without the other. Speculators take risk and hedgers reduce risk. You can do some amazing financial magic by mixing and matching these concepts. I loved speculative markets. It was by far my favorite class at business school and it is the one class that I find myself going back to regularly for inspiration.

5 – The best price to sell something isn’t always the lowest price. My favorite case study was the champagne producer who couldn’t sell his product in the US until he tripled the price. Then his sales went through the roof. Tom Evslin has a post on this topic on his blog today and it was the inspiration for this post.”


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: