On efficient allocation of capital

One of the things we learn in finance is the efficient allocation of capital, in other words, how to allocate your money wisely. There are a couple of ways to do this. One is to use your money to generate a higher return than your opportunity cost or cost of capital. Or, to put it more succinctly, get the most return for your buck.

 

Let me give you an example of how I efficiently allocated my money last night.

 

Cover charge to get into the Martini Bar to celebrate two classmates’ birthdays: $3 Oh wait … scratch that … I showed up before they started charging the cover.

 

Alcohol (plus tips): $16.50.

 

Striking a random conversation with an undergrad and finding out what night the nursing students hang out at the bar: Priceless

 

Seeing that cute BSBA (Kenan-Flagler undergrad program) I have been noticing at McColl, introducing myself to her, and the getting to dance with her and her roommate: beyond priceless.

 

Note: this is not the undergrad cutie in my investment banking class that I blogged about earlier.

On the joys of academia

Today was the last day of class for the 2005-2006 school year. Toward the end of my accounting class this morning, my professor shocked the class when he got a bit emotional in telling about a conversation he had with his daughter recently (I am not sure whether this happened this year or in a previous school year). He called her on his way home and told her he had a meeting earlier with the dean where he submitted his resignation. She told him that “teaching is your life” and convinced him to retract his resignation the next morning.

The story goes to show that there is something about being in school, either as a student or a professor, that makes it a uniquely satisfying experience which cannot be duplicated elsewhere. I was reminded of this last night when I left Lucy’s and as I rounded the corner of Henderson and Franklin Streets, I ran into this one undergraduate girl and her friend as they were leaving another bar. I had first met them back in November right after the sorority mixer (I had left the mixer and gone across the street to Top Of the Hill to get sobered up before getting into my car) and we have since been randomly running into one another at the various bars along Franklin Street. After seeing the huge line that had formed outside Top Of the Hill, the three of us ended up going to I (heart) NY Pizza to get something to eat.

At the pizza place, we talked about our experiences with school. They will be graduating in about two weeks and talked about their plans for post graduation. I told them the one thing I find most amazing about my college experience (and to a lesser extend, my business school experience) is that you are in a concentrated population of people who are in the same “place” as you are. It’s a great time to build relationships, discover new things about yourself, and have fun along the way. Last Saturday I had a conversation with a second year student and she said she liked her experience at Kenan-Flagler so much she didn’t want to graduate.

I very much would like to be at that place a year from now.

An “alternative career path”

Tomorrow night is an event that is being advertised as the highlight of the MBA experience at Kenan-Flagler, the MBA Follies. It is an annual presentation of student-produced videos that mock or parody student life (or specific students) at Kenan-Flagler.

 

I am particular looking forward to see which of my classmates get smacked this year. In February I went to the website and watched some of the videos from previous years. There was one from last year that I thought was hilarious. It’s about students who decided to pursue an “alternative career path.” Now that we are in the last week of classes and I still have yet to find an internship, I am tempted to consider pursuing such an “alternative career path.” However, as the video will make evidently clear, I lack some of primary characteristics that would make me a successful applicant in such an endeavor.

 

(To view video, go to the web page, and click “Alternative Career Path.”)

 

Enjoy!

On sales and marketing

Today’s class was the last for the investment banking class that meets every Monday for four hours. We spent the day discussing the 2002 situation where Hershey’s was up for sale and potential suitors included Wrigley’s, Kraft, and Cadbury Schweppes.

In March when investment banker Gary W. Parr spoke to our class via teleconference, he talked about some of the skills that have made him successful. He said (paraphrasing because I lost my notes) “if I can’t convince a client why my team is better at analyzing a deal than everybody else in town, I have lost a client.” I thought about that yesterday when I talked to a friend from college. He now works for a high power finance firm in Boston and recently had the opportunity to overhear a conversation between the chairman of his firm and another passenger on an airplane. The passenger asked what the chairman does for a living and the chairman’s answer was very telling. He did not say he worked in finance. Nor did he say he worked in mergers and acquisitions. And it was not investment banking neither. He told the passenger he worked in sales.

My friend relayed that story to convey the importance of salesmanship skills in non-sales jobs. But it got me asking, “why stop there?” Hardly a week goes by when I don’t do something that requires sales or marketing skills. This reminded me of a line from the movie Boiler Room where Ben Affleck’s character was motivating his team of salesmen on the art of closing a deal over the telephone. He said (again paraphrasing) “every telephone call results in a sale. Either you sell the customer into opening an account or he sells you his explanation on why he won’t open one.”

Vice President Arnold Vinick?

When I saw the preview last night to next week’s West Wing episode, I almost gasped when it showed President-Elect Santos (Jimmy Smits) talking to Senator Vinick (Alan Alda) and offering him the vice presidency. I said “almost.” The only reason why I didn’t was because I was at He’s Not Here last week talking to two other classmates who watch the show and one of them predicted that Democrat Santos would reach out to his Republican opponent in an attempt to unite the nation behind his presidency.

 

With Sam Seaborn (Rob Lowe) as the chief of staff and Ainsley Hayes (Emily Proctor) as the legal counsel for the new administration, I am so sad this is show is about to come to an end.

Countdown to India

Two weeks from today I will be leaving with 24 other classmates, one program assistant from the Office of International Programs, and one professor to India for two weeks. This is part of the Doing Business In India class that I am taking. We will be visiting destinations in Delhi, Bangalore, Mumbai, and Agra. We will be spending our time visiting different companies, exploring the cities, and meeting local Kenan-Flagler alum and admitted students at a reception.

This past Thursday we had a briefing by the second year students who went last year. They gave us advice on what to expect and what we can do to minimize the hassles during the jam packed 14 days. The professor tried to mentally prepare us for the extreme level of poverty in India, saying every year there are students who are unable to emotionally get over the unimaginable level of poverty they encounter in some of the poorer parts of Delhi. One second year described the experience of walking around the major cities and being followed by hordes of people begging for food or money. She compared it to the scene from the Verizon Wireless commercial where a customer walks around town and is followed by a swamp of Verizon Wireless employees following him to support the network of services that are available on his cell phone. 

Earlier today I went scuba diving for the first time. The event was organized by the MBA Adventures Club and the instructor was a classmate who is a certified diver. We spent half an hour in the shallow end of the pool learning the basics such as how to flush out your mask if it gets foggy and how to locate your regulator (the breathing device) in the event it falls out of your mouth. We spent the remainder of the two hours frolicking in the ten feet deep water. The longest I spent underwater was about ten minutes. It was an amazing experience.

 

I carpooled to the scuba diving location with a bunch of Indian classmates. On the way there, the driver asked me if I would mind him putting on some Indian music. I said “I might as well get used to it so bring it on.”

Bittersweet

There is a classmate whom I am quite fond of. We have many things in common; we are both finance concentrators, we both have invested a great deal of effort into our internship search and have both gotten a low rate of return on our investments. We have one more thing in common, we both interviewed for the same position this past week.

 

I had mixed feelings last week when I saw his name on the list of interviewees. My initial thoughts were that since the offer could not go to both of us, at least one of us would have been disappointed. Then I decided that if I wasn’t going to be the offer, I’d like to see him have it. I emailed him several Morningstar research reports on the company over the weekend (oh …. this is my secret weapon on interviewing, I have an online account with a brokerage firm which gives me access to research reports from several research and broker firms, I have found these reports to be incredibly useful and current when it comes to learning about the company you’re interviewing with) and wished him luck on his interview.

 

When I got the news on Wednesday that I didn’t get an offer, I was disappointed. I take that back; when you are still interviewing in April, you are no longer disappointed when an interview does not result in an offer, you get pissed. Then when he told me yesterday that he got the offer, it was a bit awkward when I congratulated and I could sense he felt bad that I didn’t get it. Then later I thought  about it and realized it wasn’t so bad.

 

At least both of us didn’t walk away disappointed.

Some words of encouragement

Earlier this evening we had our annual faculty appreciation party where all the professors who taught first year students were invited to the plaza for food, conversation, and the handing out of awards to those who were voted the most popular among the students. Afterwards I went to the gym and when I returned from the gym I found myself once again in the all too familiar position of receiving an email telling me the company I was waiting to hear back from had decided to go hire another candidate.

I felt frustrated because I had spent all that time preparing for this particular interview and it got me nowhere. It was as if all the work that I had done was for nothing. During dinner, I thought about the situation a bit more and noticed a parallel between what I felt and something I had observed earlier at the party. There was a professor who teaches a custom core class who was there but did not receive an award. I am not sure if the organizers of the event did anything to smoothen out the awkwardness of professors attending and walking away empty handed but I felt bad for the guy. He’s not a bad instructor. It just happens that he’s not popular with students partly because he is shy, speaks with an accent, and tells jokes that may be funny in his own culture but most students just don’t find to be all that funny.

After dinner, I wrote him an email. I didn’t say anything about him not getting an award but mentioned that I saw him at the event and didn’t get the chance to talk to him because I left early. I told him I liked his class a lot and still remember his jokes and find them funny. I told him to tell more of them to next year’s incoming class.

Trading in my suit and tie for a cloak and dagger

I was a bit of a peculiarity yesterday (more than usual) when I walked into McColl wearing a suit and tie. The reason for the costume was an interview I had in school with three people from a local software company for a business development internship.

The questions asked were some of the more challenging and unusual ones I have gotten in an interview this year so far. The man from corporate recruiting asked about the best and the worst class I have taken at Kenan-Flagler. The Kenan-Flagler alum who currently works in marketing asked how I would go about evaluating whether the company should enter markets in Latin America, Russia, or China. He asked the risks and other considerations involved. The senior director of business development (a Fuqua grad) stopped me in the middle of my resume walk-through to ask why I believe AOL has lost its status as the leading internet company. He later asked for my opinion on where different countries around the world are heading economically. He then asked why I believe the United States is ahead economically than other countries and what these other countries would have to do to get to where the United States is currently. This is a good example of what I wrote about earlier about how difficult it is to prepare for interviews and that oftentimes I end up giving answers that don’t come from the work I did in preparation for the interview but from others news sources that I regularly consume.

I walked out of the interview feeling more like I have just interviewed for an analyst position with the Central Intelligence Agency than with a software company. I am hoping that maybe this whole “we are considering you for a business development position at (name of the company)” is just a cover story and that I am being recruited for a position as a spy for the government, think of Sydney Bristol in Alias or Arnold Schwarzenegger’s character in True Lies.

Sharing classroom space with undergrads

The investment banking class meets every Monday and Wednesday. On Mondays our instructor, who flies down from New York City, gives us a four-hour walk through on how to do valuation models and every Wednesday we have a guest speaker. Past speakers include Gary W. Parr (via teleconference) from Lazard Freres and Hugh McColl, for whom the building was named after. But the most interesting aspect of the class is that about 10 out of the 50 students are undergrads. These are juniors or seniors who have accepted a job offer from an investment bank and whom the school has deemed will benefit from the course.

The presence of undergrads makes for some interesting dynamics. Earlier today our instructor was talking about the difficulty one encounters with using the discounted cash flow method to predict the value of a company. He used AT&T as an example and said no one in 1984 would have predicted the path it would take in the years since the breakup. He then paused and asked who in the room was born after 1984 and all the undergrads raised their hands. Later on when we were putting together a discounted cash flow model on Excel, the undergrad cutie sitting next to me was having trouble with some formulas. I gallantly offered my services. But just as I was getting somewhere, the T.A. physically inserted his presence between us and said “perhaps I can be of assistance.”

 

At the end of class, we formed study groups to work on our assignment due next week. My study group consists of three MBA students and three male undergrads. I have been told that because the undergrads receive a letter grade for the course while the MBAs receive the standard pass/fail, the undergrads tend to outperform the MBAs on these assignments. It will be interesting to see if this is evident within our study group. And in case you are wondering, I asked the undergrad cutie if she was in a group and her response was “oh I am in a group already, thanks for asking.”

 

Bummer.

McColl speaks, He’s Not Here, and other business

Since I have no Thursday classes and today is a UNC holiday, I am in the mist of a four day weekend, hence the reason for not having posted in the past 48 hours. Hugh McColl spoke to my investment banking class Wednesday afternoon. The CEO of McColl Partners talked about how he found “a loophole” in 1981 that allowed NCNB to expand outside of North Carolina and by the time he retired in 2001 he had oversaw more than 1000 acquisition and NCNB was operating under the name Bank of America. One student asked how he judged whether a person could be trusted and he said he assumes that everyone he meets can be trusted unless that someone demonstrates otherwise.

 

We had a happy hour at He’s Not Here last night with free beer for Kenan-Flagler students. With the warm weather and a full moon, the night was almost perfect. Among the crowd from Kenan-Flagler that turned out, I spotted the real estate professor. It just happened that earlier this week I had a conversation where I wondered out loud why we almost never see professors come drink with us. I also ran into a couple of non-Kenan-Flagler folks whom I have not seen in a while. At around 1, people began scattering for Lucy’s while I went to I (heart) New York Pizza with a much smaller crowd.

 

With the disappointing news I received on Monday and McCoy pointing out on Wednesday that Money Magazine had named my old occupation as the best job in America, I was beginning to wonder why I left my old life to come to business school. Last night was a good reminder that business school is about more than just taking classes and getting an internship.

The latest figures from Office of Career Services

The following information was released this morning.

 

* about 33% of first years have yet to accept a summer offer

* about 25% of second years have yet to accept a full time offer

* compared to this time about a year ago, roughly 3% more second year students have had at least one offer.

* the mean base salary for second years who have accepted an offer is $91,603, roughly 3.9% higher than approximately at this point a year ago.

* the mean signing bonus for second years who have accepted an offer is $24,637, roughly 19% higher than approximately at this point a year ago.

Yet again

I cannot use in front of polite company the words that flashed through my mind at about 10:40 yesterday as I walked toward my car at the Kenan-Flagler parking deck. I went to school early to meet with another student on redesigning a particular club’s web site and was about to move my car to avoid getting a ticket when I checked my voice mail to see if there was any news regarding the interview I had in Atlanta. There was a message telling me that the company had decided to make an offer, to another applicant.

 

So once again I find myself back to square one. I keep hearing stories about how last year there were all those students who did not find internships until the very end of April or later and that there are still so many good jobs out there. Looks like I am going to find out how true that is. I was a bit upset afterwards in accounting. When class ended I went to talk to a professor in his office about my situation and he walked me through several options on what I can do this summer to strengthen my resume for next year’s job search.

 

The toughest part of today was forcing myself to confront the reality that I may be spending the summer in Chapel Hill. Instead of working for a corporation, I may be walking around McColl looking over faculty research projects, teaching next year’s class the basics of a discounted cash flow, or doing odd jobs for local companies. After spending the lunch hour thinking over this fate, I realized that while it’s not the most ideal situation, it’s not the end of the world.

 

This afternoon the associate director of academics sent out an email to first years on some administrative tasks we have to do before leaving for the summer. It included the dates of the summer pre-MBA workshop and the incoming class’ orientation along with a call for students who will be in town this summer to help out. It’s almost as though she was reading my mind. Or more likely, she’s been reading this blog.

Final push

As April progresses, I become more and more aware of just how “under the gun” we are to get that internship locked up before I leave for India in early May. I don’t know why I use the word “we” since I am the only one on the line here but I assume that many of my readers, like many of my classmates, are rooting for me. Going forward, I am going to allocate more time to the internship search and less time to class work. This may not sound like the most prudent thing to do but I’d much rather have an internship and get an L (low pass) on every class (I have been told that failing a class is unheard) than to get a P (pass) on every class and spend the summer doing faculty research projects.

 

One big regret I have about this year is not having spent more time during Mod III  on the job search. I have classmates who purposely selected a light class load during Mod III so they could take full advantage of the on-campus recruiting calendar and simultaneously start an off-campus search. I wish I had done this instead of taking the regular 7.5 credits and waiting until the on-campus interviews dried up in early March before starting the off-campus search.  So for the members of the Class of 2008 who are (or will be) reading this blog, and it was terrific meeting a bunch of you on Saturday during the MBA Experience Weekend, plan on front loading your job search as early as possible.

 

In other news, I ran my first 5k this past weekend. The event, called Girls On the Run, raised money for a program for build pre-adolescent women’s self esteem. I started off running at a good pace for the first one-half mile before slowing down to a walk. When I got to the last quarter mile, I could see the banner over the finish line and, realizing the finish line was where the spectators were, managed to launch into a sprint before crossing the finish line. In church yesterday, a girl said she saw me at the 5k. I jokingly asked if she saw me crawling or limping. She said “no it was when you ran across the finish line.”

Getting good at what I am good at

I blogged earlier about a decision I had to make yesterday on whether I would accept the mobile MBA internship (that’s the actual name of the position) that I interviewed for in Atlanta. Yesterday morning, I came across an article about the CEO of AOL speaking at a media industry event where he predicted the internet eclipsing the television as the primary method by which consumers receive their information and entertainment. He talked about a “massive change” taking place led with products such as video on demand and more and more content being deployed to portable devices.

Reading the article reminded me of what excited me about my job at AOL. Three years of working as a software engineer began to get boring, which led me to consider other options such as business school, but what continued to excite me was knowing that my projects played a role (albeit an extremely small one) in this unfolding media revolution. After reading the article, I asked the person I know to make the phone call to the connection he has with the company to help me get the offer.

Earlier today I talked to a professor in his office. The conversation turned to other schools and he talked about all the professors who have left over the past twenty years to teach at Darden. He said Darden is renown for excellent teaching but has never been known as a research school. At one point it spent a lot of resources into turning it into a research school but abandoned the efforts when it realized it made more sense “to get good at what you’re good at.” A similar logic may apply to my situation. Instead of trying so hard to get into a field I have no experience in, I might be better off concentrating on improving on what I am good at, even if it means getting into a field where jobs opportunities are limited.

Note: I can't take credit for the above picture. I did a Google search to find a picture of the AOL MISSION plague thatdisplays on the lobby of AOL's headquarters. I found it on a web page written by a former AOL intern. Ironically this former intern worked on my team at one point.

Choosing between marketability versus “doing what you love”

Earlier this week I had to make some decisions about the interview I had on Friday in Atlanta. This is the one with the major internet content provider where I would be working on its strategy of deploying content to handheld devices. Ever though I have yet to receive an offer (the interviewer said it would take one to two weeks) I had to decide on whether I would accept the position if offered.

 

The reason was because I know someone with business contacts in Atlanta who offered to make phone calls on my behalf to a connection he has high up within the company to help secure the internship. Even though the interview went very well on Friday (it ended with the interviewer telling me “I can’t make any promises because I have more people to interview, but let’s just say I greatly appreciate your knowledge of the industry and your enthusiasm”), I want him to make the phone call to lock it up. However, the catch is if I ask that the call be made, I would be required to accept any offer I receive because of it.

 

This internship position is pretty amazing. When I worked at AOL, I knew of people who had these types of jobs and have always wondered what one would have to do to get them. I have a big interest in the media whether it is print, radio, television, or internet. Having this company’s name on my resume will enhance my credibility if I decide to seek future employment in the media sector. In addition, these are not the types of jobs that are easy to come by. I should consider myself lucky that I was pre-selected for the interview and did as well as I did. Yet I am having trouble deciding on what on the surface looks to be a ‘no brainer.’

 

“These are not the types of jobs are not easy to come by.” That’s exactly the reason I would have to hesitate to accept this internship. The course of study I have chosen so far at Kenan-Flagler has been finance focused and most of the summer positions I have interviewed for have been industry finance positions. If I don’t get a full time offer (or choose to not accept one) after spending the summer in Atlanta, how will I market myself to future employers? I can go back to interviewing for industry finance positions but since I didn’t have finance experience prior to business school and will not have had a finance internship, I will have a hard time getting an interview for many of these positions. By accepting this internship, I may be narrowing my employment options for post-graduation.

 

Yesterday morning, I thought about the situation a bit more. So far I have had a paltry return on investment on the more than twenty cover letters I have sent out for specific finance positions (by that I mean companies that have specifically advertised a position either via Kenan-Flagler or on their web sites). Meanwhile, I dropped one cover letter for a position where I am excited about both the company and the function I’d be doing within the company and I now have a (at my estimation) 50% shot at getting an offer. Perhaps the marketplace is trying to tell me something. Locking down an internship will certainly make the rest of Mod IV a lot smoother.

 

I am going to come back later and tell you what I decided.

Quoting the accounting professor

I visited my accounting professor’s office this afternoon to ask him questions about some of the concepts that would be covered on tonight’s midterm. He is an extremely witty guy and I tremendously enjoy the back and forth that always takes place whenever I stop by. Originally I was going to blog about some of the hilarious things we said to one another. But I decided against it, not because he said anything inappropriate, but because I feel that a conversation in one’s office should always be “off the record.”

 

So instead, I will repeat something he said on the first day of class. I was reminded of this earlier tonight during the exam.

 

“Some students call me Joey, you can call me whatever you want. After the midterm, you will be calling me all kinds of names.” 

Surprise! (Part II)

Three weeks ago today, I had a surprise for my classmates on the first day of Mod IV when I walked into accounting class with my freshly shaved head. This morning when I walked into accounting, I received a surprise of my very own.

 

I had missed class on Friday because I was in Atlanta. Although I arranged to have the class videotaped, I did not return until late Friday and was unable to receive the tape before this morning’s class. I walked into class ten minutes late because of parking problems (the story behind what I had to do to get a one-day parking permit this morning is worthy of another blog posting by itself) and the professor had already begun class. He was in the middle of discussing not today’s case but last year’s midterm. I was a bit baffled as to why he was discussing the midterm since it was not part of today’s required reading. Just to make sure, I turned to the syllabus to confirm.

 

That was when I saw it.

 

APRIL 4                       TUESDAY             MIDTERM EXAM

          In-class, open book, PC, etc          6:00 - 9:00

          Rooms: 2500, 2550, 2575, 3250, 3575

Katie Couric headed for the Tiffany Network

Always glad to see a fellow Virginian (and UVA grad) going places, even if it is Katie Couric. Unfortunately, this is not an April Fool’s.

Major news!

Buckyhoo hired for inaugural program on CNN’s mobile network

 

April 1 - Atlanta, GA - (AP) – CNN announced today that it has tapped Kenan-Flagler student and blogosphere sensation Buckyhoo as the new host of a program aimed at extending the network’s presence into mobile platforms.

 

CNN’s Vice President of Mobile Programming, Dean Canterbury, said that the program marks with CNN’s strategy of deploying its programming content beyond the television.  “We started in 1980 with a 24/7 all news television channel, continued in the 90s with an internet presence, now the next frontier is handheld devices.”

 

Starting April 9, This Week with Buckyhoo will “air” every Sunday at noon and will be available to customers of mobile services such as Blackberry and Verizon VCast.  Other customers can purchase the program via iTunes for $1.99.  The one hour program will feature live as well as taped guest interviews and edgy social commentary from Buckyhoo.

 

Reached at the McColl Faculty Lounge, where he was busy catching up on the last three weeks of his managerial accounting class, Buckyhoo said “this will give me a nice excuse to get out of Chapel Hill on the weekends. This town has lost its charm ever since Off Franklin ran out of business in January.”

 

Media analyst P. Rick Turner said CNN will be able to use Buckyhoo to attract a young audience to its new mobile offerings. However, not everyone is equally enthusiastic about the new program’s potential. Mary Smith, the Franklin Koury Moorehead Professor of ethical strategic entrepreneurial management communications at Kenan-Flagler Business School recalled having had Buckyhoo as a student during the core. “I hope he takes this assignment more seriously than he took my class, where he often showed up unprepared, and made the most off base, offensive, and unsubstantiated claims during class discussion. Frankly, if I want that type of sarcasm, I’d speak to my children.”