There, I've just provided you $103,000 in tuition savings (less the relational opportunities, and of course, the degree).
I learned exactly seven things at Stanford Graduate School of Business getting an MBA degree in 1972. I always used them and never wavered. They were principles that enabled me to put the cookbook formulas that everyone revered in context and in perspective. I think they served my clients (and perhaps me) rather well. Here are those seven principles, and who taught them to me:
Conspicuously absent from this list are Prof. Jack McDonald and his Efficient Market Theory and Random Walk, Prof. William Sharpe, Nobel Prize winning author of the Capital Asset Pricing Model (which he later acknowledged didn't work because his data were wrong, but it's still used everywhere and they didn't take away his prize) and Prof. James Van Horne, who believed that the Fed actually controlled the economy through its monetary policy actions. Gene Webb -- who at least tried to improve my people skills -- and Ezra Solomon in International Finance deserve honorable mention.
- Don't use many financial ratios or formulas, and when you've picked the few that will actually tell you what you want to know, don't believe them very much (Prof. James T.S. Porterfield);
- Remember that any damn fool can compute an IRR or DCF. The trick is to find a business that can return 20% after tax, understand its critical indigenous and exogenous variables, and then run it so it meets its return target. (Prof. Alexander Robichek.)
- Always ask what can go wrong (Porterfield);
- Never extrapolate beyond the observed points of a distribution, you have absolutely no information outside the observed range (Prof. J. Michael Harrison);
- Remember that you can always break the bank at Monte Carlo by doubling your bet on red at the roulette table every time you lose. The problem is it will break you first; It's called "the takeout." Therefore, always manage your financial structure so that takeout is not an issue. (Porterfield.)
- Big M (today Nassim Taleb's Black Swan) is never a part of the optimal solution. If it shows up in the answer with any coefficient greater than zero, you have the wrong answer and have to continue to do program iterations. (Harrison.)
- There is never any excuse for looking through the substance of an economic transaction, whatever the accounting, and if the accounting permits you to do so, it's wrong (Prof. Charles T. Horngren.)
Monday, March 30, 2009
All the value of a Stanford MBA in a single post
here, courtesy of Chris Wyser-Pratt '72: