Friday, March 04, 2011

GUEST POST: B-Schools and C-Students

Many students embarked this week on the grand adventure of their university years, many of them eagerly setting out on the adventure of business school. Not to bring them all down, but business school graduate Vedran Vuk (author of the Casey Daily Dispatch) explains in this Guest Post why the grand adventure of business school isn’t necessarily all it’s cracked up to be.

In my daily missives here at the Casey Daily Dispatch, I’ve often demeaned students of political science, philosophy, and other less career-oriented majors, but to be fair, today I want to turn the tables on my own academic background, business.

In my opinion, business degrees aren’t necessarily a good choice. It really depends on what one does with them. Careers can range from CEO to assistant manager at the local McDonald’s. Business degrees don’t guarantee results like medicine or nursing; however, they should be applauded for their versatility. Many of my former classmates entered into companies that they never could have imagined.

But there are certainly negative aspects to both the standard business curriculum and the students who study it. So I’ve created a list of several common problems:

  1. Lack of Entrepreneurship – A business school education does little to prepare students for entrepreneurial activities, and very few students go on to become entrepreneurs. The dream job of most business students appears to be a comfortable position inside a major corporation with a salary of $100K. For a field that’s based on risk, creativity and entrepreneurship, there are surprisingly few willing to make the entrepreneurial leap.
  2. A Focus on Corporations – Not only are business students not particularly entrepreneurial, but they are also pushed toward large corporations during the whole education process. For example, accounting and financial valuation are always taught with gigantic corporations in mind. But in a way, this is pointless. Unless a student becomes a professional equity analyst, they will likely never find an undervalued company in their lifetimes.
    However, the chances of discovering an undervalued apartment building in your hometown are fairly good. Or the chance of finding an undervalued small business in need of venture capital is much more likely. Unfortunately, the curriculum is almost always geared toward evaluating ExxonMobil rather than evaluating Joe’s Bakery down the street. The latter would be much more useful for most students interested in profit opportunities.
  3. Lazy and Mediocre Students – You know the saying about companies being run by C students. Well, it really is true; one reason being that the best and brightest don’t end up in business schools. Essentially, most business students are interested in making money. So they clearly didn’t choose philosophy, art history or political science. But they also didn’t choose engineering, profitable science sectors, technology or the medical field. Hence, many want money, but don’t want to study anything difficult. Of course, some just really enjoy the business world. Nonetheless, business classrooms aren’t the place to find the brightest students on a college campus.
    Because of this factor, there is even a vast difference within a business school. The finance, economics and accounting majors are often noticeably different from the others. Many business students are scared to death of any intensive coursework. There’s always extra space in the accounting, econometrics and financial modeling electives.
  4. A Lack of Passion and the Hustle – As noted above, the vast majority of students aren’t interested in becoming experts in their field. Most focus their efforts on hustling and networking to find a corporate job. When a presentation from a prospective employer comes to campus, the same students who never ask a single question in class are suddenly the most curious students in the Q&A sessions. Furthermore, almost everyone wants the hot stock tip; few want to learn statistics to find market distortions. 
    Of course book smarts aren’t everything. But if you aren’t entrepreneurial, don’t know statistics, don’t know accounting, and don’t understand valuations, what business skills have you really acquired after four years of college? Other important business skills such as relationship building, good management and sales are more often than not learned on the job rather than in school.
  5. Bad Fits and Ethical Problems – I don’t mean ethical problems here in the regular meaning of the word. Instead, it’s an issue of career choices. There are many individuals out there who feel that the business world is full of greed and that the free market is evil. And strangely enough, many of these individuals are business students.
    Personally, I’ve never understood this. If you believe the business world is inherently evil, then what are you doing majoring in business? Perhaps it would be acceptable if you envisioned creating a better company. But most of these students plan to work for the same corporations that they despise. In my opinion, these are the most unethical students in business schools. They’re already engaging in activities that they feel are morally wrong.

When I was on the job hunt almost two years ago, I ran across an interesting opening at a major institutional player. The position was for a research associate who would spend two years training in different groups before settling for the ideal position. The groups included fixed income markets, equities and interest rate swaps. It was one of the best job openings that I’d seen during the recession.

But the opening didn’t ask for any business majors – not even finance and economics backgrounds. Rather, the position asked for biology, chemistry, engineering and math majors for the position. And given the quality of many business students, I’m not surprised by this choice.

Well, I hope that we’re even now on the degree-bashing. And don’t think that some of those criticisms don’t apply to me. I’m certainly not perfect. If I had to evaluate myself, I’d say that numbers 1 and 2 may point to my own flaws. As you can tell by now, I’m not exactly running my own business either, and my focus happens to be on large-scale corporate valuations.

Vedran Vuk is an analyst at Casey Research and the author of the ‘Casey Daily Report.’ He graduated with a BBA in Economics from Loyola University of New Orleans, and is currently pursuing a M.S. in Finance at Johns Hopkins University.

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7 Comments:

Blogger StephenR said...

But they also didn’t choose engineering, profitable science sectors, technology or the medical field.

Great point. Part of my job is examining the wealthy and there are certainly plenty out there who've done the hard yards in the very technical areas above, and then expanded as owners through their business savvy.

3/04/2011 02:40:00 pm  
Anonymous Anonymous said...

I can recommend a book, probably not unfamiliar to many, which addresses this very issue, but from another stance. A somewhat more holistic stance (and when you read the book you'll know why).
A whole New Mind : Why right-brainers will rule the future, by Daniel H. Pink.
This right-brainer thinks these trends have been evident for about ten years.


Lemon Juice

3/04/2011 02:43:00 pm  
Anonymous Falafulu Fisi said...

Vedran Vuk said...
Rather, the position asked for biology, chemistry, engineering and math majors for the position.

Yes, there shouldn't be any surprised there, because the data analytical tasks in those disciplines are much more advanced compared to the same level taught in Finance/Economics classes.

A good book for analysts and I would recommend it to those who are currently involved in the financial markets.

My Life as a Quant: Reflections on Physics and Finance by Dr. Emanuel Derman.

Dr. Derman co-developed (with Black & Toy) the Black-Derman-Toy for interest-rate based derivative instruments (at Goldman Sachs).

This model works perfectly in financial calm time, but it is useless when financial tsunami hits, ie, it cannot foresee it when it comes. The main reason? This model is one of the many financial/economic models that are based on market-equilibrium, which in reality it doesn't exist in the real world. Real markets is non-equilibrium.

This explains why majority of current models fall-over when financial tsunami arrives, since bubbles & bursts are non-equilibrium dynamical behavior of markets (where risks can't be estimated properly by equilibrium models). There have been many non-equilibrium models that have been developed & published in recent years to deal with the shortfall of current established equilibrium-based models.

I don't know why, finance/economic courses at Universities are still teaching those equilibrium-based models as part of the curriculum , even in reality , market equilibrium doesn't exist.

3/04/2011 05:38:00 pm  
Anonymous antal said...

I concur. Business school is terrible. Did two years of it.

3/04/2011 07:20:00 pm  
Anonymous Anonymous said...

its a truism throughout all fields that The C grader becomes the owner and employs their class mates. A grade students are like any one else, and only 1 in 20 of them are entrepeneurial.

3/05/2011 07:40:00 am  
Blogger telecommando said...

Totally aggree, I did an Otago B.Comm in the 80's, graduated got a job and realised that I'd spent all those years learing about how 60's & 70's style US and multi-nationals worked and sod all about NZ! Like many graduates much of my first few years was spent selecting and briefing suppliers, something they didn't really cover! Fortunately I also have a military background so I just used the format for giving orders in combat! worked a treat.
I have often heard the 'C' student story and from observation its often true!
I think it has a lot to do with EQ Vs IQ and many C graders are better at all the people stuff!
Be interesting to know John Keys grades? from seeing him in action he is a skilled trader and pretty good manager

3/06/2011 11:50:00 am  
Anonymous Anonymous said...

Pick's book neatly explains the A-grade/C-grade difference in real life performance (as opposed to academic performance).
The A graders have been streamlined through the education system which values left-brain (analytical) thinking.

The C-graders often have abilities which are not valued within these settings, hence the lower grade scores, but higher levels of right-brain thinking - creative, lateral, pattern identifiers, and have a greater ability to see and many times act on entrepreneurial opportunities. But things are not so black and white. We all know of the 'Renaissance Man/Woman' who has strengths in both types of thinking styles, both left and right brained.

Lemon juice

3/06/2011 02:11:00 pm  

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