Normandy Beach 101

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I was in an MBA program at a fine school, but there were a couple of small problems.

1. It was an hour drive from my house.
2. I wasn't making any income; I was just learning... something.

Number one was a nuisance, number two was unsettling. I had a business degree but I knew that corporate America demands more, these days. They want pedigree before they see your feet walking into the interview door. Doesn't matter how capable you are, either. It's hard to get get much of a chance to prove your capability when you aren't qualified.

If my undergrad experience taught me anything (and, of course, yours may differ), it's that real learning wasn't the point; the point was passing the exams. If real learning were the point, there would be no exams- there would just be milestones and no one would question whether you were ready to reach for the next.

Think of it this way- do we teach people to swim or to diffuse bombs the way we teach people social studies? When the matter is life or death, learning matters. 

Returning to business school...

I studied quantitative management, operations and all these other wonderful books, but a question nagged at me: What can we control? Even better, what can we predict?

If you've ever day-traded, raise your hand. Mine is up. 

Day trading is not Warren Buffet's forte', rich as he is. If anyone is into predicting the future, it's Warren Buffet. He looks at a company inside and out, sums up their capabilities and management, then makes a guess.

'Yes, people will still want Coca-Cola in the year 2020- buy it up!'

His tolerance for risk isn't that great if he's betting on what I consider blue-chips.

When I day-traded, I looked everywhere for potential money- small and big. I traded big names and unknowns. What I found is that there are no real long-term predictions that hold out. The way the market moves is really anyone's guess. I also learned, the tide generally raises and lowers all ships (see the S&P 500 for further details).

This element, predictability, is the core thread in business school.

'Can we get our shippers to deliver product JIT like our Japanese competitors?'

'Can you deliver 15% returns every four quarters?'

'What kind of sales do you predict this year?'

That last question is a good one. It drives many businesses. 'How much can we expect to sell?'

Can you imagine asking your child that when they set up a lemonade stand?

'I'd like to set up a stand. Can you buy me some lemonade mix?'

'Well, I'd like to, but how much do you realistically expect to sell in the next four hours? Because if you're not hitting 10% increases, well then, the risk just isn't worth the loan.'

Banks.

Wait, weren't we supposed to be in a lecture back in business school? Why are we daydreaming about lemonade stands?

Let's go back in time to DOS- the operating system that essentially launched Microsoft.

How much did Gates expect to sell? How much Apple product did Wozniak and Jobs expect to sell? Would their outcomes have been different if they had to make a guess and base their productive output on that guess?

I enjoyed the strategic courses in business school. I also enjoyed taking my research to the next level by interviewing CEO's. I wanted to hear from the source what it was really like to build and run a successful company, because deep inside, I wanted to start my own some day. But statistics... hmm... interesting, no doubt, but what did they do for the business manager? More specifically, what could they tell an entrepreneur like Gates, Wozniak or even Sam Walton?

One day I asked my statistics professor a question that would change my life, for better or worse. It wasn't so much a question as confirming what I intuitively felt quite certain of.

'Over a long enough time line, the predictability of any endeavor reduces to zero... right?'

'Yes,' he said.

And there it is. It's no mystery: the greatest mathematical minds in a hedge fund couldn't predict the future any better than Nostradamus given a long enough time scale. That's not to stop people from trying. Look up any company and you'll see charts, statistics, and other methods to try and do what Nostradamus looked silly attempting.

But there's a caveat. If your business is static, not really growing, old.. then yes, a lot of it is predictable. Our nation's auto-manufacturer's come to mind. Did business school expect me to move into that kind of corporation?

Business school isn't totally worthless, but by the same token, those who appreciate risk (risk tolerant is the term, I believe) and are adventurous may not fit well within that kind of structure. They know the world is unpredictable, but they storm the Normandy beach of business anyway, because they believe. They may not be able to control the outside world, but they can put their soul into their work, buckle down against the barrage of obstacles and keep their fingers crossed that luck might be on their side. How many people go to work on Monday and feel that way in a static business environment?



-Chris
www.delacroixleather.com