The Five Things I Learned In Business School

I’ve come to realize that a lot of young people who are just starting out in the business world and have an interest in venture capital read this blog. I love that this blog can be a place where they can learn something.

I also realize that many of them struggle with the choice about whether to get an MBA or not.

I think MBAs are worth getting if you want to make a serious career change or need to take a couple years to figure out what you want to do with your business career.  However, if you are sure about what you want to do and are on a track that can get you there, I think MBAs are less useful.

I went to business school because I wanted to be a VC when I got out of college and everywhere I asked, I was told that I needed an MBA.  So I went and got one. I went to Wharton which is one of the top schools and I had a good experience there.

But it wasn’t like MIT, where I attended undergraduate.  At MIT, I learned so much that I could never blog all of it.

I learned five things in business school.  They are five important things, but there are only five that I can list.

I told them to Charlie a couple weeks ago and he seemed to get something out of hearing the list so I figure others might as well.

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.

That’s it. Two years and who knows how much money got me five concepts.

But they are a big five concepts.  I find that my MBA gave me incredibly strong fundamentals in finance that I use every day (at work and in my personal life).

I am glad that I went to business school but I also recognize that its not a "must" for the venture business or any other business. 

I honestly don’t look to see if someone has an MBA when I look at a resume.  I look at the track record and the person, not the pedigree.