Note: I started writing this blog post in October. I'm finally getting around to finishing and posting it in July. Revisiting it transported me back to the intensity and insanity of the first semester of business school, and possibly brought on some mild PTSD. But for the most part, I am proud of myself for having made it through and appreciative of how much I've learned between then and now. This is a recap of the first of four quarters of classes in the first year. Hopefully I'll find time to write up the rest sooner rather than later.
I am officially done with my first set of grad school finals! This feels like a major accomplishment. It was a lot of information to take in over a very short amount of time (~7 weeks), and even though I didn’t do exceptionally well on my exams, I learned a lot. In an attempt to retain at least some of it, I am writing out a short summary of (what I remember of) the course material. In general, it was pretty intensive – even people who majored in the subjects we learned found the classes challenging, and I didn't major in anything remotely close – and it was more math than I’ve done in a very long time. Since math is not my strong suit, I felt like I was floundering through most of it, but now that I’m on the other side I feel good about things. And I think I learned more than I realized.
Teamwork and team management
This class was fun because it was the most interactive. It was a weeklong mini-course that we took before the rest of the core classes began, and we spent it doing team-building activities with our assigned small groups of 8-9 people. The activities focused on synergy (the idea that a group is better and more effective than the sum of its parts), different decision-making styles (a spectrum between fully collaborative and fully autocratic), the interplay between leaders and subordinates, efficient team structures and processes, organizational hierarchies, and intergroup relations. We also wrote a foundational document that defined our team's goals, processes, and norms.
Probability and statistics
I really enjoyed this class, largely because the two professors who taught it didn’t take themselves too seriously. In the probability section, we learned how to draw probability trees, find conditional probability (what is the probability of X happening if we know that Y happened), rules for binomial distribution (flipping a coin), and rules for normal distribution (the bell curve). In statistics, we learned about the Central Limit Theorem (according to our professor, the one theorem to rule them all): the fact that the means from a large enough sample will follow a normal distribution. We learned how to do hypothesis testing and when to reject the null (depending on how strict your confidence interval is), and we learned how to do regression analysis: a concept that always sounded fancy but I never knew what it meant. Basically, it means looking at the relationship between different variables (for example, to what degree can home prices be explained by square footage?). And, we learned how to use Stata! Stata was always one of those things that I saw on other people’s resumes and that seemed super impressive. Now I can look super impressive too.
Microeconomics and game theory
Of all the classes I took, this is the one that I agonized over the most. I love the concept of economics, and I think about it a lot – especially in terms of developing more sustainable and equitable alternatives to our current economic system. I want to do well in it, more so than, say, accounting. But I have a very hard time understanding the basics. My worst grade in undergrad was microeconomics, which I took the first semester of my first year, and which discouraged me from ever studying it formally again. But I had no choice this time around, and I truly do want to understand it. I definitely understand more now than I did as an 18-year-old, but how much more is still up for debate.
We covered a lot of material in this class, including a separate four-session overview of game theory. For economics, we talked about the basic concepts of supply and demand, finding equilibrium (where supply equals demand), and our professor’s favorite concept, elasticity (how much consumer demand or producer supply of a good changes in response to changes in price). We learned about the effect of government interventions (taxes); typically, it just makes the market less efficient (of course, there are other benefits to taxes, but they were beyond the scope of this class). We talked about how different theoretical market structures function (specifically, perfect competition versus monopolies) – neither of these exist in the real world, for the most part, but they are helpful to study since they are the two ends of a spectrum. I liked the concepts that had to do more with consumer characteristics and behaviors: price discrimination (charging different types of customers different prices, like discounts for students or higher rates for business travelers), risk aversion, and the effect of asymmetric information (adverse selection: when buyers have more information than sellers; for example, high-risk people are more likely to buy health insurance, and moral hazard: when someone is more likely to take risks when they won't bear the costs; for example, people with car insurance are incentivized to drive more recklessly.).
For game theory, we learned about the different types of games: simultaneous-move, when you and the other player have to make your decisions at the same time without knowing what the other will do, and sequential moves, when you make your decisions at different times, so you can predict how the other player will respond based on what you choose to do. We learned about the Nash Equilibrium, which is the state in which both players choose their best option based on what they think the other will do. We talked a lot about different examples of the Prisoner's Dilemma, where both people are better off if they cooperate, but in practice they often don't cooperate because they don't think the other person will. We also learned how two firms who compete on price end up undercutting each other until the price is the same as the marginal cost (Bertrand model), and how two firms who compete on quantity choose their output quantity based on how much they think the other will produce (Cournot model).
We learned a slightly different approach to negotiation than what is taught elsewhere, based on the concepts of mutual gain and "splitting the pie". The basic idea is that the goal of a deal is for both parties to be better off than they would have been on their own, and that the point of negotiation is to quantify the value of how much better off they would be and to then split that value in half. We also learned some of the more traditional negotiation concepts, like reservation price (the highest price a buyer is willing to pay or the lowest price a seller is willing to sell at) and BATNA (best alternative to a negotiated agreement; what you'd do if the deal didn't work out). The best part of this class was the opportunity to practice negotiations ourselves; we were given different roles to play for various situations and then prepared, recorded, and evaluated our negotiations. In one, I was a representative of a large pharma company negotiating with an entrepreneur who just developed a new drug; in another, I was an independent gas station owner selling my station to a large oil company. Both were pretty fun, if a bit awkward.
This was the only full-length “soft skills” class (as in, many sessions started with the professor reading a poem). For me, it was a welcome balance to all of the math. Not all of my classmates agreed – a lot of them thought it was a waste of time, or at the very least, that the material wasn’t presented well. But I really enjoyed it. I value introspection, and I believe that having strong interpersonal skills is the most important determinant of success. And I really appreciated the poetry. More than once, I found myself holding back tears as a poem was being read – a testament to both the power of the written word and the fragility of my emotional state at the time. (One of my favorites: "Under One Small Star" by Wislawa Szymborska.) A lot of what we learned in class was based on Dacher Keltner's concept of the power paradox: the idea that the behaviors (empathy, generosity, integrity) that propel people into positions of power are likely to be lost after power is achieved. While I think this view of what gives people power in the first place is overly optimistic, I did find the idea of the paradox worthwhile. We did a lot of interactive activities that helped us practice emotional intelligence, alliance and coalition building, change management, and perspective taking. We also talked a lot about the importance of networking, which some people found inauthentic, but which I valued – I like networking because I authentically like making connections with people. This was also the only class where one of the assignments was to watch a movie of your choice with your small group and discuss it afterwards. My group watched 13th, which I highly recommend. Just don't watch it solo in the library like I did. I was angrily sobbing to myself at parts of it and hoping no one noticed (luckily, no one said anything).
Modeling and decision making
This was a bit of a schizophrenic experience for me. It was basically two classes in one: one half was spreadsheet modeling and linear programming, which was completely foreign to me. I found it interesting but pretty inaccessible (though I started having a glimmer of understanding by the end). The second half of the class focused on human decision-making, which was one of my favorite parts of business school so far.
The linear programming piece was all about using Excel to model decisions that are too complex for humans to make on their own (i.e., when there are multiple different inputs that all affect each other). It's probably easiest to explain using an example: one of the first (and most basic) problems we worked on was how to help a fictional nut company optimize the different nut mixes they offer. The different nuts have different wholesale prices when bought as ingredients, and the different mixes have different retail prices. Given the different prices of each, how much of each mix should the company make? What if we know the customer demand for each of the different mixes? What if we already have a large quantity of cashews that will go to waste if we don't use them? What if a retailer has already placed a large order for one of the mixes? If we find that the mixes with almonds are especially profitable, how much would we be willing to pay for an additional order of almonds? Luckily, Excel uses a magical plug-in called Solver that helps you find the correct answers for these, but knowing how to set up the model is the challenge. It took me a long time to wrap my head around it, but I understand it at least somewhat now, and it's a really powerful tool.
The second half of the class was more qualitative and totally up my alley. We talked about the fallibility of human decision making, and how statistical and data-driven decision making is almost always superior. We also talked about how to appropriately incorporate risk and uncertainty into decision making. We learned about the Bayes Rule, which contextualizes a lot of the concepts of probability (what I remember most is that false positives in medical tests are more likely than you'd think – here's a good explainer that I just Googled). And in one of my favorite class sessions of the entire quarter, we discussed how to value human life using the classic Ford Pinto case. In essence, the idea is that even though people are horrified by the concept of putting a numerical value on human life, it can't be avoided. Risk is inherent in everything we do, and the value of life boils down to the amount of risk we're willing to assume. For example, when it comes to driving cars, most people agree that basic safety features like airbags and seatbelts should come standard. But what about advanced backup cameras that could safe a handful of lives a year, but that cost thousands of dollars to produce and install? Should car companies be mandated to install them in all cars, even if that means jacking up the price and making it harder for consumers to afford a vehicle? Should the car companies absorb the cost? Should the government subsidize the car companies to make the change, even if that means using taxpayer money? If we truly believe that the value of life is unmeasurable and that life should be protected at all costs, shouldn't we set the speed limit to 20 mph and drive around in personal tanks? Obviously, the issue, along with most complex decisions, isn't black and white.
Of all the classes of the quarter, this one felt the most straightforward, though straightforward definitely does not mean easy. It just means that there is a defined set of information that you must understand in order to understand the topic. I heard many times that learning accounting is like learning a new language, and I’d say that’s an apt description. Words that are familiar in everyday parlance, like “debit”, “credit”, or “expense”, mean something completely different in the world of accounting.
The first thing we learned is that accounting is much more subjective than you’d think, which I appreciated. You need to use your judgment to decide which transactions should be included on financial statements, how things should be categorized, etc. We learned the fundamental accounting equation (assets must equal liabilities plus equity) and the concept of double-entry accounting, which means that accounts should always balance – so if you enter a transaction on the asset side of things, you have to enter a transaction of the same amount and direction on the liability/equity side.
There are three main financial statements: the balance sheet, the income statement, and the statement of cash flows. Each one gives useful information about an organization's financial state. Most of the class centered on these three statements, and we spent a lot of time practicing how to prepare them when given certain pieces of information, and how to deduce missing information. For me, the most interesting part came at the end, when we learned how to analyze and interpret financial statements: this allows you to compare different companies based on their financial data, and get a sense of where companies are doing well and where they're struggling.
All of this material was presented in such a short amount of time that it's unclear how much I will actually retain. I definitely could have studied more and given it more of a chance to sink in, but I was so swamped and overwhelmed with everything that that didn't feel like a viable option. And, because a lot of it wasn't material that I would have chosen to study on my own, I would have had to push myself to spend even more time on it. Instead, I focused on the basics and was mindful of the fact that I was coming in with less background knowledge than many of my classmates. So even though I'll never be a CPA or the world's best spreadsheet modeler, that's not why I came to business school, and at least now I have a basic understanding of the foundational concepts of business. And for me, that's quite the accomplishment.