MBA – A Learning a Day

A few thoughts on relationships – the final MBA Learning

2 years ago, I began writing weekly posts under a category called “MBA Learnings.” I thought it’d be a great excuse to share what I’m taking away from my experience at graduate school. While some of these started out as lessons from the classroom, the series has evolved into a collection of mammoth posts that attempt to frame the experience (classroom lessons are part of regular posts). The hope with these posts – such as today’s note on relationships – is that they are applicable to life as much as they are to graduate school.

In a meeting with senior administrator at school yesterday, she wondered why many just “get through” the experience when there is so much more you can absorb. My thesis is that it is similar to life – it demands a clarity around priorities that only comes after a certain amount of thought. The following 6 links hope to frame the landscape to make the thinking process easier.

1. I’m in, Now what? – An attempt at helping you structure your transition to school once you are admitted.
2. Advice to an incoming student – A long “expectation setting” post that breaks life at school into a tension between 6 priorities
3. Designing for introversion – An introvert’s guide to thinking about the MBA experience
4. Lessons learnt from internship recruiting – Lessons + a guide to how to think about the summer before school. I have, since, written a more comprehensive guide to a job search.
5. The recruiting journey through self doubt – A few thoughts on dealing with the emotional aspects of the recruiting process.
6. Digging into my 1st year process – A reflection on how I approached my 1st year and what I learnt

This final learning is one that has been many years in the making. The reason I picked relationships for the final post is because it is never an easy topic to write about. To approach this, let’s first ask the question – why is it so much easier to make friends in high school and in college than at work? More folks have “best friends” from their college and high school days than from work. That isn’t to say it isn’t done. It just happens lesser than one might expect.

While youth and malleability are a factor, my sense is that high school and college allow for two important factors that help with forming deep relationships – shared experiences and slack time. Shared experiences are powerful in forming relationships. Hours and hours of slack time help deepen those bonds as you learn about the little things about each other. At work, while working in teams on intense projects often creates those shared experiences, it is less common to find work projects that result in plenty of slack time.

Graduate school lies somewhere in the middle – there are shared experiences if you take similar paths. But, that is a big if – there are very few students who would even have the same academic journey as you. And, slack time is rare if you decide to keep busy. There are many who will admit to never having been as busy at work as they have been at graduate school. But, and this is where things get complicated, you expect to build friendships the same way you did in your college or high school. You also expect to build out a “network” – whatever that means. So, the business school dream ends up becoming about walking out with this amazing portfolio of friends who will refer you to dream jobs and partners on your course to building that great global business. So, you might be tempted to attend every social event, every dinner, every evening at the bar and build that “network.” As you might imagine, all this gets overly strategic and stressful very quickly.

My recommendation would be to call bullshit on everything before you get started. This is hard to do because you have to discipline yourself to cut through the noise to get to what matters. I clearly remember a good few instances when I found that very difficult. The strategic intent involved with “building your network has irked me” from time to time. But, I’ve learnt to get over that. The key with environments that offer a lot of opportunities to find your own approach.

If I had to boil what I’ve learned about friendships in graduate school (and life?) into 3 things, they would be the following –

1. Understand your own priorities and align your actions based on those priorities. This gets down to the question – what really matters to you? Do you care about having a broad network of global friends? Or, do you care about having a solid group of 3-5 friends? Do you care that these friends are international or would you like all of them to have similar backgrounds? There isn’t a right answer here. The key is to be intentional and to be consistent with the kind of person you are.

For example, I care a lot about a few deep relationships and my hope with school was no different. I just cared a lot about having 3-4 friends at the end of the experience that I would have a relationship with. But, I was also interested in getting to know people and hearing their stories – something the school environment uniquely enables. So, I would set up time to go for walks with people. I’ve probably taken walks with 2-3 new people 1-on-1 on average nearly every school week over the past 2 years. Whenever someone suggested we should grab coffee, I’d take them out for a walk. But, when given a choice between depth vs. breadth, I would choose depth.

2. Engage deeply in some communities or maybe even create your own. Going back to the idea of combining shared experiences and slack time, activities or communities help with both. It doesn’t matter if it is the running club, band or entrepreneurship club – it matters that you engage in communities that you care about. These sorts of communities enable you to meet diverse people with whom you can build relationships based on shared values and beliefs.

You can also create your own little communities, of course. A couple of friends created an activity where they spent time with individuals doing an activity the individual loved. Another duo regularly hosted dinners where the conversations were based on meaningful themes. Another brought the same group of foodies together to eat at various restaurants. I was part of a group that showed up every Friday evening at a spot to discuss our lessons for the week.

Communities are especially important if you seek to build relationships with people different from you. Most relationships need to make their way from knowledge -> understanding -> trust. If you and I grew up in the same place, it is easier for us to understand each other and, then, to trust each other. But, if we’re from different continents, we need an excuse to really get to know each other and, slowly, understand each other. The flip side of this long process to understand each other is that the trust that emerges is one that, like all things hard earned, is very special.

3. Learn to let go – expectations are relationship killers. This is a general life lesson but one that is incredibly applicable to relationships. Expectations destroy relationships. All relationships are two way streets – it can only work if both sides are equally keen to make it work. When it works both ways, we aptly call it “chemistry” – because the reaction between the two produces an outcome that is different and better. But, it is hard to know when things work out well. It generally requires a lot of experimentation. Reactions also happen at different speeds – some are instant, some happen over a longer period of time.

My experience here is that you attract people based on who you are. If you are a person of good character, you attract people of good character. In the long run, it all works out. That doesn’t mean it is easy to let go in the short run. Whenever we put in the effort to give to people around us, it is really hard to say – “Hey, I’ve given this everything and did so because I cared. But, I don’t expect any reciprocation from the other end.” But, doing so makes life much happier. Just be patient with yourself – if my experience is anything to go by, this is something you’re always working toward. :-)

One last thing. Relationships are never easy. When we attempt to build them – whether it is a friend or a significant other – we have to give ourselves to people and choose to be willing to extend ourselves. This means coming face-to-face with our own insecurities and our desire to be loved. As is the case with these attempts, we will often meet with failure and breaches of trust. The takeaway from those experiences shouldn’t be to stop trusting altogether. It should be to get better at picking people.

We have many influences in this life – our diet, the information we consume, our environment, etc. – but probably none more so than those we spend time with. Every once a while, we will come across people who not only make us feel loved but also push us to be the best version of ourselves. When that happens, hold on tight and enjoy the ride.

In the end, all we have is each other…

relationships

Interviewing Dan Ariely

I had the privilege of interviewing the wonderful Dan Ariely in person last Wednesday. I had interviewed Dan three years ago over Skype and shared it here and the erstwhile “Real Leaders Project.” On an inspired day in January, I’d reached out to Dan if he’d be up for another Skype interview. It turned out he had planned a trip to Chicago in May and was planning to visit Kellogg. Voilà! We locked 2pm-3pm on Wednesday, May 25th.

Dan shared a few very personal anecdotes in the interview and requested us to not share the video in public. So, while I don’t have the video, I have my notes from the talk –

On the reproducibility crisis which is threatening to question the validity of many social science findings. As consumers of research, keep healthy skepticism. However, also dig deeper to understand what principles underlie the results being presented and whether they can be replicated in different environments.

For example, he conducted a study in a slum in Kenya testing various techniques to help people save. This included a variety of reminders, incentives and the like. The winner was a large fake gold coin which the participants placed in their hut and added a scratch mark every week they met their savings target. This large coin was a daily reminder to save and the principle here was to have frequent reminders around them to save. It worked great. But, how much of this would be replicable in a city? And, how many items in our home remind us to save?

Life is complex. So, when we go into a new environment, we need to understand the context and figure out which principles would work in that environment.

On how to think about the vast amount of social science research. One of the mistakes we make is hyperbolic discounting – over weighting the present. As we create more technology, we seem to find more ways to kill ourselves. Smoking, texting and driving, etc. The big question is how can we help people eat better, exercise more, sleep right, etc. We haven’t made progress on these. Instead, we’ve made better donuts and made Facebook more addictive.

When we seek to understand human behavior, a process that helps is to analyze people’s micro decisions in a day to look for patterns instead of trying to understand overall goals. Everyone wants to be healthier. But, what are the tiny decisions they make in a day that goes against that goal?

On applications of his work. Particularly exciting when government does things like – making people sign at the start of the tax form versus the end (done in South America).

There are four factors that waste human capacity – health, time, money and hate. If we can do things to improve these four, it’ll be huge progress.

On political climate in the world. I love the definition of a just society by John Rawls – “If you knew everything about it, you’d be willing to join in a random place.” It is a beautiful definition.

In an experiment on ideal distribution of wealth, we found that people all around the world want a reasonably even health distribution. They just don’t know that the bottom 40% of people in the United States only have 0.3% of the wealth.

Much of the objective in politics is to get people to not think. So, we have slogans and ideology instead of thinking about where we are and what we want to be. What could we do to make sure people think once every 4 years? It is one area where we haven’t improved decision making at all.

On biases that get in the way of us being good leaders. A behavior that is hard to get over is to develop the courage to express your true opinion in a world that values political correctness. How can we as leaders encourage people who will disagree with us?
The academic process is pretty solid here – to get tenure, you need people from other universities to write letters. So, you can have very open discussions. While it is not possible to replicate this in corporates, this is something we need to be very mindful of.

Embracing failure. Experiments teach us humility. Understanding how often you are wrong is incredibly helpful. Doubting our intuition, keeping an open mind and experimenting is critical. It is shocking how many companies make decisions based on intuition. Intuit encourages “magnificent failure” with a prize of $1M every year and provides the creator 6 months off to test the ideas. Failing in a magnificent way means you tried, failed and learnt.

On ethics. I had an offer to speak to the management of a tobacco company for a large fee. So, I called the American Heart Association and asked – should I not go or should I donate the fees to you? They asked me to go. But, I decided not to because I don’t think the person I spoke to grasped the externalities of that decisions. Ethics are expensive. I think a lot about my own conflicts of interest. There is no easy answer.

On decisions. I think of 3 categories of decisions. Little decisions (e.g. buying a coffee or donut) – these I don’t pay attention to. Big decisions are those which we can do better at with a bit of effort. Then, there are habits – this, I do think about. If I set up a few good habits, then there can be huge impact in my life.

On heroes. Joep Lange, who was killed in the Malaysian Airlines flight that was shot down, single handedly worked to reduce AIDS in Africa. This required a rebellious nature, true dedication and single mindedness.

On how research has affected him as a parent. The environment is changing – not necessarily with your long term benefit in mind. Acting well is going to get harder with more interruptions from smartphones and other devices. So, we need to be aware of this.

As far as money goes, we give kids allowances and have them split into 3 buckets – for them, for people they know and for people they don’t know. Researcher Mike Norton has shown that people who aren’t happy with money are those who haven’t figured out how to give. In an experiment, people were given Starbucks cards and asked to use it on themselves or for other people. The people who bought coffee for others were much happier.

On one piece of advice. Take more chances. We are privileged to live long. Think of life as an opportunity for continuous learning. Education is never over. Keep on thinking of life as what we are going to learn and get better.

On an idea that inspires you that you’d like to share with us. A problem I am thinking about – how can we make side effects in medicine feel pleasurable? Cyclists enjoy the pain from cycling. If they don’t feel the pain, they don’t feel like they have done their job. We call this benign masochism. :-) Can we frame side effects as less negative? Could we make patients feel good about them? Could we increase adherence?

Dan Ariely, Kellogg

First principles thinking with Dean Jacobs

I am 3 weeks away from finishing up my final quarter at graduate school. As I reflect on some interesting lessons and moments in the past 2 years, I was reminded of a conversation with former Dean Donald P Jacobs last year. Dean Jacobs, well into his eighties now, was the Dean at the Kellogg School of Management for 26 years between 1975 and 2001. Aside from the fact that the length of the tenure is notable, Dean Jacobs’ accomplishments in that time were nothing short of legendary.

Education is a sector where brands are sticky. There is a joke that Harvard was the top ranked school in Physics before Physics was even taught at Harvard. Reputation matters a lot and stays with you for a very long time. Dean Jacobs took over at Kellogg in 1975 when the school was decidedly a third tier business school. He retired with the school firmly considered in the top tier and consistently on top of the rankings. It is very rare to see a turnaround of that nature. As I was part of the team running the orientation for the incoming class, a teammate and I decided to speak with Dean Jacobs to understand the context and history of our school. Many of the stories he shared are covered in this Poetsandquants article. But, there’s one nugget that stood out to me.

In the 1970s, a lot of management education was delivered by former business leaders. It was a lot about the latest trends in business and was pretty tactical. The parts that were delivered by academic professors were, well, very academic. When Dean Jacobs asked – “What will management education look like in the next few decades?,” one of his key conclusions was that we would need to dig deeper into the first principles which governed business. To him, this meant taking a much more academic approach to management as learning about current trends in pricing was going to be obsolete in a couple of years. However, understanding how the economy works and how pricing fits in would be knowledge that would be evergreen. So, instead of hiring business folk, he focused entirely on hired freshly minted P.hDs in fields like Game Theory, Economics, etc., to teach at the school. While this was a game changing move, he ran into the known problem that these Professors didn’t know much about business. But, since he believed that we were moving toward an era of life-long education, he decided to build the first executive MBA program with funding from Booz Allen’s co-founder James Allen. This was a masterstroke for a few reasons. First, the executive MBA was an innovation that helped build the school’s nascent brand with executives around the world. Second, it was a great source of revenue. And, finally, it gave the Professors the opportunity to understand first-hand what was going on in business in exchange for giving executives a first principles academic perspective on business. In the exec MBA classrooms, the executives shared stories and real life case studies where the learning was applicable. All of this fed right back into the full time MBA program.

His investment in academics led to plenty of interesting new research at the school. Key among the new wave of research was a recurring conclusion that business education needed more emphasis on working in teams. His decision to invest heavily in building a culture where students worked well in teams went on to define the culture of the school and served as a competitive advantage in the late 80s and 90s.

There’s plenty more that can be written about the innovations that Dean Jacobs led. For me, however, the interesting part is that it comes down to that first principles question that can be applied to anything we do – “What drives this and how is that going to change in the next few decades?”

Everything we do is a product of the questions we ask.

(Dean Jacobs greeting Dean Sally Blount who took over in 2009)

Interviewing Seth

I had been looking forward to a Skype interview with Seth at school for many months. It took me a few months before I was sure the technology would work. I promised him a good experience and I definitely felt a bit of the pressure of the promise in the days leading up to it. It all worked well (thank you to KIS – our tech team!) and the interview was a real treat.

Unfortunately, though, the video recording was not the best. So, I’m afraid I’m unable to share that with you. Seth has very kindly offered an audio interview for this blog in the future. I won’t be taking him up on it anytime soon as he was so generous with his time and perspective. But, I look forward to doing so in a year or two.

Until then, I am pleased to share my notes. These are paraphrased and “I” refers to Seth.

Thank you so much, Seth. I intended to have a cliff notes version of the talk. But, there were SO many pieces that resonated.

On general and specific. There’s a difference between a wandering generality and a meaningful specific.

On how we’re measured. Today, we are measured on the change we make on other people.

On daily blogging. It is malpractice to not have a daily blog. Because, if you write something in public every single for 50 years, you will be better. You will be happier, you will be smarter and more connected.
When you look back on your posts, what you are going to see is your intellectual development. Doing it in public is much better because you can’t lie to yourself and you can’t skip a day.

On whether there’s the pressure of writing one of the most read blogs on earth. I love the fact that I’m about to touch people. But, if someone doesn’t get it, that’s okay – for both of us, I hope. That’s the only way I can do the work – by saying this one’s only for the person who gets it.

On productivity and the MBA. (I asked Seth a question about productivity but he decided to talk about what he thought was more important. I am glad he did) In some ways, it is the best time in history to get an MBA. In some ways, it is the worst. It is the worst because there is more supply of people who did what MBA’s did than ever before. There are also less organizations who demand the blue chip stamp. And, then there are other organizations who are asking you to do things that aren’t necessarily things you want to do – they’re just paying more.

The reason this is the best moment is – if you choose to, you can see. You can see how the world works, you can see through the lens of behavioral economics, industrial history, social movements. You can see all of these pieces fit together – not from a technical point of how do I do this or that. None of the technical stuff is going to matter 4 years from now. What’s going to matter 4 years from now or 20 years from now is – are you the person in the room who sees the world as it is and cares enough to change it? There are very few people are privileged who can do both of those things. I think that is 10,000 times more important than your productivity. What we know is that it doesn’t take an enormous amount of sleepless nights to do those 2 things. What it takes is the bravery to do something that might not work.

On mentors and heroes. There aren’t enough mentors for every mentee. Heroism scales. If you decide to be a long term investor, you can ask – what does Warren do? And, you can read his book or the Berkshire Hathaway annual report. Heroes don’t have to be rich or famous. They just have to be on a path that you hope to go on one day. The magic of that is that you can inculcate their beliefs and act as if. And, sometimes, you can get really good at it and do it better than they did because you are starting with a bigger head start. (So, you can read my 7,000 posts and go farther than I ever did. I’m just trying to be a compass.)

On being right. Being right about the strategy is irrelevant if your audience isn’t enrolled. You’ve been trained to be right. It has taken me a long time to train myself that being right isn’t all that important. The people who are daring and are doing it out of generosity make WAY more impact. If you look at the list of products that Apple and Microsoft have made over the last 25 years, it will stun you. It just goes on and on with one wrong product after another. You can be wrong a lot of times and make the iPhone and you will be fine.

On Trust. Trust comes from making promises and then keeping them. The goal is to not just be consistent but to make bigger and more generous promises.

On career choices. Acceleration is a change in velocity. I picked a job after school based on two things – was it in an industry that was growing fast? and who was going to be my boss?

I’ve done projects all my life. With projects. you realize that you don’t have to hit home runs ever. Singles are better than a home run. People who talk to me about regrets after business school bought safety when they left. They started wanting to do that for 4 years. But, what they don’t do when they get there is share an apartment and eat brown rice and white beans everyday. Instead, they buy a BMW (since they have a miserable job) and the next thing you know, they get a promotion and stock options. Then, they worry about losing the stock options – haven’t you guys gone to your sunk cost class? :-)

Trade safety for acceleration and freedom.

On being “on duty.” If you can be the person you choose to be when you are being judged, you can be that person all the time. Then, your life becomes way simpler. You don’t have to worry about who’s watching. Just be that person in your private life and you’re going to do great. The mistake is to let the person in private be the person you are all the time. Then, you are going to disappoint us.

On management and leadership. Management is getting people to do what they did yesterday, but faster and cheaper. Leadership is helping people go where they want to go. Leadership is about getting people signed up to do what all of us want.

On the AltMBA. The goal is to transform into people who see the world as it is, to understand how to use words and images to cause other people to change their mind, and how to make better decisions. If we can help people do those 3 things, sky is the limit.

Everyone of you, even those with appropriately sized egos, is more powerful than you imagine. The challenge we face is – given that power, what are you going to do with it?

On creative process. As I get older, I get better at my creative process and get less creative. Because I don’t think those two things go together. There is no such thing as a creative process. Creativity is the work you do when you are not afraid. And, whatever method you can find to stop being paralyzed by your fear – because you can’t make it go away – but, so that you can dance with it is good. People who have something to show for their creativity have it because they decided it was important and cared enough to live with the fear.

Every one of you is an artist who has been pushed to fit in. The hard part now is to care enough to fail, to care enough to say – “Here, I made this.” And, when the person says – “I don’t like this, I don’t like you, you are a fraud”, you can say – “Oh, it must not be for you.” Then, offer it to somebody else.

You get to be the best in the world by not running away from the hard work that makes you the best in the world.

On quitting. Quit before you start if you are not prepared to stick it out to the end.

On parenting. Every kid is home-schooled between 3 o clock to 11 o clock at night. Even if you are not at home, they are home-schooled. You’re going be asked to trade-off time with your family for metrics of money or notoriety. I hope you’ll choose to trade some of it, maybe even a lot of it.. because they are counting on you.

On difficulty. I’ve been bounding out of bed every morning for 38 years. It is a choice. I’ve been to places where any of us would do almost anything to not have to live in that village with no electricity. And, I remind myself on a regular basis – this is not hard work. This might be difficult but it is not hard work. Hard work involves helping someone with leprosy, burying someone you grew up with. This is the safest human beings have been in our history, more powerful. What a privilege.

On infinite games. As the industrial age ends, information is not finite. Either we keep playing finite games and blow ourselves up, we will adopt a different mindset and just keep playing. We won’t pass it forward because we will win. We pass it forward because we can.

A few thoughts on culture

As part of my annual review process at the end of every year, I ask myself – “Who/what were my biggest sources of inspiration this year?” It is a useful question as I think about all those people who’ve had a repeated positive impact on me. Inevitably, Seth Godin takes the top spot. I have been reading Seth’s blog for five years or more now, sharing his posts and thoughts here and, most importantly, revisiting his posts from time to time. Often, when I think of the topics he tends to write about, I realize that my definition of a particular idea came from one of his posts.

One such seminal post and idea is “change the culture, change the world.” This post boils culture down to one line – “This is what people like me do.” The first time I read this, I asked myself and all my friends (I think they got tired of hearing about this post within a week) – “What is it that people like us do?” And, we ended up attempting to coordinate a “Mastermind Group” across three continents to discuss various topics that mattered most to us. We decided our culture was one around having conversations that matter. The project didn’t work because of timezone issues but it is one that demonstrated to us how much we cared about having conversations that matter. I have continued to implement that idea ever since – at graduate school, I have time set aside every week for a conversation that matters with a group of friends.

I realize now that my answer to the question about my biggest source of inspiration was actually incomplete. There is one other person who has influenced me in a way similar to Seth – Clayton Christensen. While he doesn’t have a daily blog that I know of, his book “How Will You Measure Your Life?” got me started on a path that has gone on to help me define how I live. I listened to Clay’s TEDx talk and read his excellent article (which, unfortunately has been put behind a paywall by the folks at HBR) and I was again left thinking about culture. Clay’s insight was – “Ultimately, people don’t even think about whether their way of doing things yields success. They embrace priorities and follow procedures by instinct and assumption rather than by explicit decision—which means that they’ve created a culture.” Or, “this is what people like me do.”

I’ve written before about how you build culture in a team. Building culture and sharing the culture are two different things, though. While you might imagine any great culture would be automatically shared, it doesn’t work that way. As I have repeatedly learnt, “build it and they will come” is fundamentally flawed. Our culture is built around “best selling” or, in the case of the internet, “best sharing?”

I think the way culture is shared is by sharing stories. It is like the famous collection of Macy stories which talk about Macy’s employees who go to incredible lengths to please a customer. It is the Zappos person who was on the phone with a customer for many hours. Stories are powerful.

As I reflect on their power, I see the effect they have had on my life. In two days, I’ll be leading and participating an initiative called “The Good Life Sessions” in my final quarter in graduate school. The Good Life Sessions is a three part series of workshops that gets to the questions – “How will you measure your life?” through a series of other questions that help break that large question down. As you might imagine, there is a lot of Clay Christensen in the Good Life Sessions.

I also start these sessions and pretty much any initiative I lead by saying – “This might not work.” While I say this to myself every time before I take a leap, I say it in public generally to shocked reactions – “What do you mean? It should work. Do you lack confidence?” Those close to me understand it. Those who are getting to know me give me feedback about it and tell me I must stop saying it. And, folks listening either love it or hate it. This is one of those things where I choose to ignore all that is said and say – “This is the cost of me doing things. This is how I approach things and this is part of me being me.” “This might not work” is a Seth idea that embraces the fact that anything worth doing begins with an acceptance that it might not work.

As this example illustrates, Clay and Seth have shared their cultures with me and their cultures are an important part of my culture and how I operate. And, they’ve shared this without us ever meeting in person. Clay doesn’t even know I exist.

That is how I’ve come to learn that cultural change is incredibly powerful. It is a big part of what I have spent my time learning about and pushing for during my time in graduate school over the past year and a half – to encourage more reflection, more conversation, and more understanding. And, as you might imagine, a big part of this is just attempting to be all of this myself – because that’s what Clay and Seth have taught me. You have to be the change you wish to see.

And, most importantly, no one is going to pick you to make cultural change. You have to pick yourself.

culture

Working capital and cash conversion cycle – MBA Learnings

Let’s imagine a company we called Nile, Inc. Nile is a vegetable retailer who has the following metrics –
Cost of Goods Sold (COGS) = $365
Average inventory = $10 (they have low levels of inventory in general)
Sales = $1095
Accounts Receivable = $30
Accounts Payable = $30

Based on these metrics, we can do the following calculations –

Inventory turnover = COGS/average inventory = 36.5
Nile, Inc. turns over its inventory 36.5 times a year. That’s a good sign. The more turns means the more efficient its inventory buying process.

DSI or Day Sales Inventory = (1/Inventory turnover) *365 = 10 days
This means it takes Nile, Inc. 10 days to convert its stockpile of inventory into cash. If Nile turned its inventory slower, it would take longer. Since it is a vegetable retailer, we can imagine it requires to turn fresh produce quickly.

Receivables Collection Period = Accounts Receivable / (Sales/365) = 10 days
This means it takes Nile 10 days to collect its receivables. This is common in businesses that work with consumers as credit card money comes in within 5-10 days.

Payable Period = Accounts Payable / (Sales/365) = 10 days
Nile takes 10 days to pay its suppliers – a short payable period for most businesses. But, this is on account of Nile’s size. As Nile grows, it is can extract longer payable periods (e.g. 100 days).

So, if we now think of what this looks like –

So, Nile takes 20 days to convert inventory to cash – 10 days to convert it from inventory to a sale and 10 more days to convert the sale to a cash. However, since it takes 10 days to pay suppliers, we can now reduce the 20 day number to 10 days.

10 days is Nile’s Cash Conversion Cycle. The Cash conversion cycle is an important idea since this means Nile requires 10 days worth of “working capital” (Current Assets – Current Liabilities on the balance sheet) to keep its business solvent. Since, at any given point, Nile will require enough cash to support 10 days of operations, if it doesn’t have the cash itself, it will always need access to a revolving line of credit that can make sure the business runs. Reducing the cash conversion cycle is an attractive prospect for most small businesses as it means less dependence on external capital. It also reduces the working capital requirements of the firm.

Amazon is an example of a firm that does an outstanding job with working capital management. Amazon’s cash conversion cycle (CCC) is actually negative. This means Amazon receives cash very quickly, turns over its inventory quickly and takes much longer to pay its suppliers. So, the business is practically throwing off cash. Negative CCCs work well for growing businesses. However, when a business stops growing, these cycles can be painful since it means you have to pay your suppliers greater amounts than you make.

Aside from a thank you to all our Finance professors, I’d like to also give a thank you shout out to Prof Aswath Damodaran from NYU Stern. Prof Damodaran has some fantastic resources available online for different kinds of finance problems.

The cost is not just the cost – MBA Learnings

Let’s take a situation where a firm decides to buy a smaller technology firm for $1 Billion.

Every decision that is made is typically the result of a cost-benefit analysis. In some cases, this analysis is entirely quantitative. In others, it has a huge qualitative element (e.g. fit with strategy). Either way, the costs of the acquisition are not just the cost of acquiring the company. Those are just the financial costs.

The costs that should matter to us are the economic costs of the acquisition – driven by the opportunity cost of using that capital. In this case, the acquiring company had 3 options on how to spend the billion dollars related to that acquisition (there are options beyond this – we’ll assume the acquisition was critical) –

Build the technology
Partner with the technology company to get access to it
Acquire it

When we take these options and their opportunity costs into consideration, the only way we get to option 3 is if we believe that it is the best use of the 1 Billion dollars. Or, put differently, had we invested the billion dollars into options 1 or 2, the long term results would be sub-optimal.

Understanding opportunity costs is fundamental in life just as it is business. At any given time, saying “yes” to a decision just because it provides us some benefit is a really bad way to make decisions. The way to make such decisions is to ask – “Is this the best possible use of my time given all my priorities?”

Great strategy requires us to make choices after understanding trade-offs. And, having a good decision making process that considers opportunity costs is an integral part of great strategy.

cost, opportunity cost

Thoughts on Marketing Strategy and Branding – MBA Learnings

Marketing strategy, to me, came down to one central insight – “Be cheap or be different.” Everything else is a losing strategy in the long run. A brand, on the other hand, is just a set of associations.

marketing strategy, branding Image source – Example associations for McDonalds

Wal-Mart, to take an example, is built on the “be cheap” strategy. And, it is likely that you associate Wal-Mart with “cheap” as well. Apple, on the other hand, is built on the “think different” idea. And, it is likely you associate Apple with “think different” as well. This is particularly interesting where Apple is concerned because owning an Apple products don’t offer much customization. Every iPhone is exactly the same with limited ability to customize anything beyond colors. So, in some ways, it is think different, but own the same thing. :-) In Apple’s case, I would posit that the source of its differentiation has moved from just “think different” to something that points to being cool/aspirational over time. It has clearly worked well for them.

When the marketing strategy and the brand’s associations align, it is pretty magical. It means all other components of marketing – e.g. advertising – are aligned too. Since alignment is key, it points to why marketing needs to begin with the product. Shoving lots of differentiation based advertising on a bad product isn’t a route to winning in the long term. Customers find out.

The product I was thinking about as I was writing this was me/us. As CEO’s of Me, Inc., I think these lessons raise some interesting questions for you and me. In particular, there were 2 questions that crossed my mind –

1. What is our marketing strategy built off? This a bit of a long-term question – are you going to be cheap? or different? Cheap means undifferentiated on everything except price and it implies an ability to do something with a cost advantage. If differentiation is the goal, however, it likely means being differentiated on skills. There are two ways to be different on skills – either be among the world’s best in one thing or possess a very unique combination of skills. If you’re going down the “world’s best” path, it means consistent deliberate practice to be among the world’s best craftsman in your field. For everyone else, it is all about combining various complementary skills.

The most famous example of the latter is from Dilbert’s author – Scott Adams. Scott Adams, in his own words, combined an average sense of humor, average drawing skills and average corporate experience to create a killer comic targeted at a corporate audience. Some of the most valuable professions today require skills across disciplines. For example, it is certain that business leaders for the next 2 decades will need to be very proficient with data. So, data analytics and statistics are skills that will matter more as time goes by.

But, is there a perfect combination that works for your field? While I would posit that there are essential skills depending on your industry (for example, most non-founder CEO’s of leading technology companies seem to have experience running product organizations), I am almost certain there isn’t one set path. Instead, what probably matters here is to just be a learning machine and to just keep picking up skills. The dots only connect backwards.

2. What are the associations linked to our brands? Ellen Kullman, former CEO of DuPont, said that people who worked with you or know you professionally have a “book” on you. The book typically has answers to 2 questions – “does this person get stuff done?” and “does this person have the ability to inspire people to follow them?” Know what the book about you says because you can shape it over time – was her advice to us.

The third question I would add is – “what are you good at?” As a result, your professional reputation is likely built on your skills, your ability to get stuff done and your ability to lead. But, “how” we do it is something that is unique to our personalities. Ellen’s point was to be aware of what your reputation is and to think intentionally about what you’d like it to be.

A quick note on self promotion – I think of self promotion as advertising. Some brands are fantastic at it and, then, there are others who shun it completely and rely on word-of-mouth/influencers. My sense on advertising/self-promotion is that you need to pick a strategy that suits your personality. You also need to target it in the right places. Mass market brands need to spend a lot of money on advertising. Niche brands are much more targeted and, in some cases, may not need any at all.

The point-of-difference here is that advertising is not marketing. Marketing is the story around your product – the promises it makes and how it keeps those promises. And, as a result, it begins with the product.

I’m in, now what – MBA Learnings

How can a relocation and a significant life move not be stressful and, instead, be a growth opportunity? This was the question I asked myself when I got my offer of admission for graduate school. I hate relocation. It was going to be a pain. But, I needed to figure out a way to make it better. Framing it this way appealed to me because there were likely a few more relocations coming up. This was how I broke it down.

First, deal with the 5 “big rock” questions. The “big rocks” are items that just have to be completed no matter what. My 5 big rocks for any move are –

People: Have I got the important people in my life (family/partner) on board? Big step. Not much to discuss here. But, this should be the first step.

2. Work and living wrap up: What do I need to do to wrap up life here? At work, this meant communicating to my managers and colleagues and then figuring out my plan until my last day at work. I structured it such that I had a month and a half off before school and I was grateful for that time.

At home, this meant putting together a list of things that needed to be “closed” – home rental, all other contracts – phone, cable, utility, and bank account consolidation. As soon as I felt I had a complete list, I put together a plan to get all this done as I knew I’d have limited time to get all this sorted.

3. Flights and Visa: Do I have all my travel to dos in place? This is definitely a process – especially when you have a significant other who also needs to figure all this out. The main lessons for me were – relocate as early as is practically possible. In our case, we got in one week before major activities started and this was useful. If I was moving for work, I would try and do 2 weeks before at least. The early time helps set the foundation for a good start.

With visa, we had a few things to consider and decisions to be made. Our situation was particularly complicated because I was traveling for work until my last day. So, we did need things to be fairly well planned. In general, I’d recommend working through all of this as early as possible and have a plan in place.

4. Accommodation and basics: What will I need to start life there? In our case, this came down to 3 things – medical requirements, accommodation and a plan to get basics in place within our first week.

Medical requirements involved us getting the required blood tests and immunizations. After that, sorting out accommodation was a priority. This was a big part of why I traveled to the school’s admit weekend – to get a sense of what was out there. And, once we had that, we just put together a fairly detailed plan (of course) of what we needed to get set up in the first week in order of priority – mobile plan, bank account, home set up, and submit required documentation were top of the list.

5. Finance: What are my “chainsaw art” financial scenarios? Numbers matter. It is hard to get financial forecasts right, however. The approach I’d recommend is “chainsaw art” – sculpting with a chainsaw instead of a fine knife. This just means that you don’t sweat the small details and, instead, focus on getting the big buckets right. As far as expenses went, the buckets that I had were – Tuition, Accomodation, Necessities, Living, Travel, and Relocation. I made some fairly standard assumptions based on my research and had a rough budget worked out.

Once I’d put this part in place, the next big question was – how do I make sure I fund this? The way we approached that was to detail out 2 scenarios – a worst case and best case. The best case involved having a few moving parts in place and the worst case was what would happen if none of our assumptions worked out. We could have had a couple more granular scenarios but, instead, focused on “chainsaw art.”

As I worked through this process, I also put together a set of key principles – I thought I’d share those below along with the rough expense forecast. None of it was rocket science – it involved reminding myself that it was an investment, to live frugally and to work hard for the only scholarship I was eligible for as an International student. I hadn’t actually remembered doing this till I pulled up my Google doc now but I’ve always found laying out guiding principles to be an important part of the process.

As is the case with these things, the chainsaw art approach worked great. Sure, there are deviations in the numbers but, broadly, they were right. My approach to finances was to not define granular budgets but, instead, set clear guidelines (as you will see, this is a theme). This meant some differences in life style – I am likely in the bottom 25th percentile of people who travel while in graduate school, for example. But, that’s a trade-off I chose right at the start and it had a lot to do my fairly global work experience prior to school. We don’t monitor our budget strictly every month. Instead, we focus on the guidelines we laid out at the start – that has worked well for us.

Next, how can I be best prepared for school? This portion took a bit of work as I needed a way to frame this experience to help me deal with the seemingly overwhelming amount of detail. While I had some of the frame in place, it definitely became crystallized over time. The 6 priority frame is what I wrote about in detail in my letter to an incoming student. I’ll go through what I did for each of these 6 priorities (in some cases, I venture into what I would have done had I known better).

1. Career – quite a bit of action here. I took a very research based approach to figuring out my career question. I had been warned that graduate school recruiting starts very early and that it helps having a focus. There are 3 steps to finding a job –
i) Decide what you want
ii) Get an interview
iii) Prepare to do well at the interview

In this case, I spent my pre-business school time thinking about what I really wanted to do 5 years out. And, given what I wanted to do 5 years out, how did that translate to my post MBA role? I had written about this in my essays and I focused on validating my ideas and also making sure they were realistic given the visa requirements for an international student in the US. For instance, I believed I wanted to switch into technology. So, I used the admit weekend to spend 2 days in the Bay Area, meet people I knew / people they introduced me to at various companies and asked everyone I met for advice. This turned out to be a very useful exercise in deciding what I wanted. This plan underwent a few changes but, it worked well overall.

As far as ii) and iii) went, I figured I’d use my time at school for that. However, I will say that this 2 day trip helped greatly with all both as well. And, I spent a bit of time testing a few sources of technology news over the summer before settling in on a couple of sources that worked for me (Venture Beat, Benedict Evans’ newsletter). I have a post on lessons learned from internship recruiting if you’d like more detail.

2. Academics – quite a bit of action here. There’s a bit of personal history here – as I spent most of my undergraduate years working on a start-up, I didn’t feel I actually did justice to my undergraduate degree (Electrical Engineering). So, I didn’t attend my graduation ceremony. But, I told myself (and my mom – who was understandably keen to attend at least one graduation ceremony) that, if I were to attend graduate school, I would do it justice. It also helped that I was really looking forward to studying business fundamentals. So, academics was always going to be a high priority.

My main question was – how can I be best prepared? I ended up purchasing a couple of books on Finance and one in Accounting. I didn’t touch the Finance books. But, I did work through the Accounting book and it was a god-send. However, I understand most schools have moved to having pre-courses in accounting. So, if you have a pre-course, I wouldn’t bother. If not, understanding what debits and credits go a long way in making Fall quarter easier.

Aside from the Accounting book, I enjoyed reading a collection of Michael Lewis books before school. This was recommended by a Finance professor and I enjoyed diving into the various financial mishaps of the past two decades. Very enjoyable and recommended. As you can tell, I was over indexing on being financially literate. I was reasonably well positioned in other areas thanks to working as a consultant and didn’t do much. If you aren’t, a course in how to use Excel and PowerPoint would be very applicable.

The final piece of my preparation was reading a book by Cal Newport – “How to be a Straight A Student?” I know this sounds incredibly geeky. But, my rationale was straightforward – I hadn’t done much studying in undergrad. Now that I was committing to learning, I was curious about Cal’s insights (gleaned from various interviews) on how to do well. The book said 3 things in my opinion – study regularly, be very intentional about how you spend your time and maintain an excellent set of notes. This was very useful advice.

3. Extra-curriculars – very little action. Attending the admit weekend was very useful. I learnt that the frequent issue was that people who like to be involved over committed to extra curriculars in their first quarter. So, I just put together a list of clubs I was most interested in and left it at that. It was a helpful starting point. I began my first quarter fairly cautiously and took up leadership position in 2 clubs. Over time, I ended up doing a lot more than that as I got a better grasp of my commitments and capacity. But, I did it because I enjoyed it and got tremendous value out of extra-curriculars.

(In retrospect, extra-curriculars have turned out to be a wonderful investment of my time. I’ve learned some wonderful lessons on leading and managing teams (you don’t get to manage large groups of talented peers all that often) and have also found them to be the source of my richest friendships since I don’t enjoy the extraverted evening scene.)

4. Social – almost no action here. I am a believer in the idea that you attract people based on who you are. So, I didn’t worry about this till I got to school. Instead, I set aside some time after my first two weeks to re-evaluate how I was doing. In that time, I found a 2nd year friend whose approach I respected and followed that. Figuring out how to approach social was a process that evolved through school. I’ve written about this in my post on designing for introversion.

5. Framily outside school – lots of action here. I had been warned that the next 2 years would be very intense. So, I spent most of my pre-MBA free time here. I did 1:1 lunches/dinners with nearly every good friend. Most of these were very memorable and I remember the conversations to this day. I spent 4 weeks at home and that was wonderful, too. My framily always had a good sense of what’s going on and also had heads up that I might disappear for a few months as I worked to figure life at school out. I also set expectations for simple systems – regular calls with family, a whatsapp group that brought together close friends, a commitment to a half yearly Google hangout, etc. These little things were continuation of ideas I’d adopted while traveling for work. So, it was just a matter of continuing to make the effort.

6. Me (+partner – if applicable) – lots of action here. This was probably my number 1 priority. I spent a fair bit of time thinking about what I needed to be ready. The governing principle here was – what got you here won’t get you there. So, as I met people – especially for career related conversations – and gathered perspective, I tried to understand what life in an MBA program would look like. Thanks to this blog, I was already pretty intentional about how I approached life. However, this promised to be a great opportunity to re-think my systems and test out an approach that would last.

The biggest breakthrough here was a process I called “The Purpose process.” While this has iterated over time, thinking about this was the single best investment I made. It has resulted in a high quality of life throughout the past 15 months or so (8 hours of sleep nearly every day!) while keeping me focused on what matters. It also resulted in an initiative called “The Good Life Sessions” that has become a highlight of my time at school. The intensity of graduate school has been a fantastic pressure test for all these ideas.

Finally, a big shout out to partners/significant others. My wife and I spent a fair bit of time setting expectations. We knew this could potentially be a very rough period. It was also our first experience living together for an extended period of time. All those conversations helped a great deal. Consistent with the overall approach, we set guidelines and regularly revisited them. Graduate school is definitely a team game and none of this would be possible without my wife’s support.

Overall. The time I spent before school went a long way in defining my approach in school. Once I’d done the work, I just put together a simple 4-5 line strategy for each of these priorities and kept revisiting them from time to time. A final part of this process was setting “process goals” along with some “ideal result” goals. I wrote about most of this and included a detailed breakdown of how I spent my time in my post about “Digging into my first year process.”

In the final analysis, relocation did turn out to be a profound growth experience, after all. It underscores a principle that I’ve seen hold true for all things in life – it is what you make of it. The nice thing about having done this once is that I’m using the exact same approach and thought process as I think about my next relocation – into full time work after school. Yes, the 6 priorities change a bit and the relative importance of certain priorities change a lot. But, the frame largely works.

As always, I’ve tried to combine high level “structure” ideas with clear examples of how I approached it. This combination always results in absurdly long posts. So, as always, I hope it was worth the read.

—
Thanks to a close friend who recently got admitted into a great school and asked me the question that became the topic of the post.

Designing for introversion – MBA Learnings

During my time as a consultant, I had a couple of memorable experiences working with extraverted managers. My favorite collection of experiences were with a very extraverted client manager who also became a very close friend. We had a running joke – every Friday, we would check in with each other on our plans for the weekend and he would unfailingly ask about potentially going out and doing something social on Friday night/during the weekend. I would, almost without exception, pass on the idea. We both knew that was going to be the outcome of the discussion. We still did it and laughed about it. We had reached a point of comfort where I didn’t need to explain my introversion to him. At the end of a week full of meetings, I didn’t really want to go out and be social. I needed time by myself.

introversion, extravert, extrovert, introvert, extraversion Source

Similarly, I always preferred finding myself a quiet corner of the client’s office to do work versus sitting around a meeting room table (as was generally the norm within the team). The introverted managers understood this. The extraverted managers took some time but, for the most part, were happy to let me do as I pleased once we’d established rapport.

A lot of modern day office work or work that requires “connection” requires a certain degree of extraversion (the research world, on the other hand, is predominantly introverted). After all, you are working with people. Over time, however, it has led to a huge bias for extraverts and, I think, the early rise of extraverts into senior positions has also led to systems that work best for extraverts. Fully open plan offices are a great example of this sort of evolution. Fantastic idea for extraverts who don’t mind having people who bump into them. Horrible idea for introverts who find every such interaction draining. Now, there are lots of benefits of this sort of layout – more team bonding, creativity, ideas, etc. It is just that there has to be middle ground. And, it is only over time that offices have learnt to create quiet spaces for the introverts to plug in and focus.

In her book, “Quiet – The power of introverts in a world that just can’t stop talking,” Susan Cain spoke described how MBA programs around the world are designed by extraverts, for extraverts. Examples of this are “networking nights,” parties and bar nights, large swathes of time spent on group projects. etc.

So, coming in to graduate school, I was curious about how it would all work out for me. A year in, I’ve learnt a few interesting lessons –

1. Susan Cain is right – there are a lot of systems in the professional/connection world that are designed for extraverts. I have found her take on the professional world and graduate school to be largely true. I think extraversion is thought to be the norm and I’ve regularly found people overwhelmed and uncomfortable at the thought of another networking night or another bar night they “have to” go to.

2. While some of these systems will stay the way they are, many of them can be changed. As a simple example, I found both the admit weekend and the orientation week designed for extraverts. It turned out that I had the opportunity to run the orientation week for the next class and our team made a conscious effort to cater to the introverts, too. I’m not saying we got this right but it is a step forward. The truth remains that the population is typically split 50-50 between extraverts and introverts. Occasionally, I get the feeling it skews even higher to introverts. So, there are plenty of folk who crave quiet time – it just requires a bit of initiative to design for introversion.

3. Design for introversion. There’s many little things that have helped me design this experience around my introversion. A few examples –

– Career – I focused my outreach to folks I really wanted to build relationships with. I realized early that “networking” – to check the box – didn’t work for me. So, I began working through close networks to figure out if I could meet people who I’d be interested in working with.

– Academics – At school, I do my best to take a crack at assignments before showing up for a group meeting. I realized quickly that I get very little value out of a group meeting if I haven’t done the work myself. I don’t do group discussion well if I haven’t done the work and don’t have a point of view. I’ve found group work to be hugely benefit IF most of the group has done the work. In these cases, we, almost always, end up at a better place.

– Social – No bar nights, more small group meals and catch ups. This has been a very useful principle since my first month here. Bar nights are low quality social interactions to me. You can barely hear each other and almost never have a real conversation. So, those were thrown out almost as soon as I tried one. I’ve found plenty of opportunity to replace them with small group meetings, “learning groups” and 30′ walking catch ups. I’ve found a lot of enthusiasm for these and these have been great to do. They’ve all taken an initial bit of initiative to set up but, over time, have taken a life of their own.

– Social – making friends through teams. I form close relationships when I work with people. So, I’ve sought out extra-curricular experiences that have enabled these. My closest relationships from school have come from extra-curricular teams I’ve worked in or led. The best benefit of this is that these groups have turned out to be incredibly diverse. And, even in environments where you have incredible diversity, I’ve learnt that forming cross-cultural relationships can be very hard and take extra effort. But, my oh my, they’re completely worth it.

Introverts are stereotyped to be quiet and lacking social skills. I do okay on the social skills front and I’m definitely not quiet. But, I do crave quiet and need time by myself to recharge, focus and get things done. While you do become better at managing social energy over time, these propensities still remain. What has helped me greatly is to be aware of these propensities and design for them. And, it is always good to know that, no matter which environment you are in, it is likely you will find several introverts who will happily join your for quiet conversation over a loud party. A simple current example – we are all getting set for a huge annual school-wide trip. It is sure to be a lot of fun. However, a big part of the trip is designed by extraverts with huge social get togethers. As you can imagine, the first step of my planning process was picking and choosing the social nights I wanted to attend and replacing them with either complete quiet nights or a nice dinner/a board game night. There’s plenty of folk who’ll want to do this. And, most importantly, even if they didn’t, I certainly do.

So, that’s where I’ll end – as I’ve discovered through my consulting experiences and at graduate school, in most cases, you can choose how you want to engage and design experiences that work for you. It just requires you to understand what you want and then figure out ways to make that happen.

As with most good things in life, it is what you make of it.

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