I read this post by Ellen Chisa recently, on the most important things she learnt at Harvard Business School. While I did not go to Harvard, I still had the good fortune of going to IIM Ahmedabad. So Ellen’s post motivated me to compile my own list of learnings from business school. But that was only part of the inspiration. There’s a standing joke, not entirely funny, among IIM graduates that many of the top schools in India are just glorified placement agencies. I thought this was an opportunity to check if that’s true. So, did I learn anything at all from my two years at business school?
As I started reflecting on my learnings, I thought – why not crowdsource some opinions and round out the article? Plus, there’s a conflict of interest in including only my learnings – I have a blog post to complete, and would be ready to manufacture some lessons if required! But my friends and classmates would have no such motivations.
Accordingly, I put this vaguely worded question to a bunch of my classmates and friends. And interestingly enough, everyone who answered assumed I meant only non-academic learnings – and replied with timeless meta-lessons like ‘importance of networking’, ‘big picture thinking’, ‘knowing you can push your limits’. This was as strong an indicator as any that this belief – that there’s not much learning to be had from business school academics – is very pervasive. Of course, on some prodding, they did highlight some of their more influential takeaways from the course subjects.
Accordingly, I’ve put together a compendium of the top ten things we’ve learnt from business school – both academic and non-academic.
Let’s start with the academic learnings first:
1. Time value of money
As a young engineer without work experience, it was quite a revelation for me that the value of money grows with time – a rupee today is not the same as a rupee one year from now. And if you leave your cash just lying around (or in a zero interest account), it’s actually losing value. At minimum, you should try to earn a risk-free interest rate on it. I knew banks paid interest on your deposits, of course, but I hadn’t realized that should be the bare minimum.
A corollary of this is that the best use of money (other than spending it) is to make more money – make your money work for you, as financial gurus say. While this hasn’t been life-changing, it has significantly influenced how I treat money – I’m always looking for places to invest it, rather than leaving it idle in my account. And I know many classmates who keep very little money in their savings account – almost everything is invested! I can’t go to that extreme – there’s enough stress in my life as it is.
2. Value of time
But while I’m always looking for investment avenues, I’m also looking for an easy bet. I’d rather invest in a low-cost fund that just invests in the stock market index, than plough through lists of the 100 best mutual funds or research 50 undervalued penny stocks, even though the latter strategy may outperform the index by half a percentage point. Why? Because my time has value too.
This concept, of opportunity cost of time, was also something that business school introduced me to. When spending time on a specific pursuit, it’s also important to consider what else you could be doing with your time, and the value of that. When starting up, the employee salary you forego is the opportunity cost. When you invest money and developer time on some product features, it is at the cost of other potentially lucrative features. When you choose to do something, you’re also choosing NOT to do something else.
On a related note – I don’t watch TV shows. I don’t want to lock myself into watching 5 seasons of a show – there are many more useful things I could do with 50 hours of my time. (OK, it’s not completely related. But I did want to make the point that this week’s Game of Thrones spoiler didn’t affect me one bit).
A concept that is more related, though, is sunk cost. This was a very useful lesson as well – that how much you’ve already invested in a particular project shouldn’t matter in a decision of whether to continue. What matters is only future investment, payoff, and the opportunity cost of continuing. I understood this fairly well as a concept, but I properly internalized it only when my first product idea was tanking – and I faced the choice of continuing to invest or trying something else. I’m happy to say I dropped it like a hot potato. Or like I stopped watching Prison Break after one season (I promise this is the last TV show example).
3. Value of optionality
One of the most popular courses in the 2nd year was FORM, or ‘Futures, Options and Risk Management’. Everyone made a beeline for this course, primarily because it had high signaling value if you wanted an investment banking / trading job out of campus. The main topic in FORM was the Black-Scholes formula for pricing an option. But it sure wasn’t my main takeaway – Black-Scholes was BS (and I don’t mean just the acronym). Rather, I took away the sheer value of having an option – of limiting your downside but having potentially unlimited upside.
This is very similar to the concept of making a skewed bet, which I posted about here. Having an option is a great mechanism to reduce risk, which, counterintuitively, is exactly what you need to do when taking risks.optionalityrocks.blogspot.in. It still exists, with a grand total of two posts, the last of which was in 2009. Still, I have the option of posting there.]
4. The usefulness of frameworks or mental models
This learning wasn’t from one particular subject. But across courses, one thing I noticed was that using frameworks – like Porter’s Five Forces, 4 Ps of Marketing, etc. – made it very easy to understand intricate concepts and analyze complex business situations. Using a well-established framework makes solving a business problem far more efficient – it takes far less time than approaching it from first principles, and also ensures that you don’t miss any important factors.
Much to my dismay, I didn’t use the Five Forces framework much in my working career, even though I joined the consulting firm that Porter started. Still, there were many other, less outdated frameworks that I used there, and today, one of the first steps I take when approaching a problem is to choose a mental framework to apply to it – it helps me arrive at a more well-considered answer, far more quickly.
This concept is very similar to Charlie Munger’s mental models, which Warren Buffett, his partner in crime at Berkshire Hathaway, highlights as a key contributor to his investing genius.
This is not a concept, as much as learning a primary trick of the trade. Ever since Harvard pioneered the case-based learning method, many schools adopted it to cultivate more practical, less bookish managers. But a common mistake they made was to focus far too much on the big picture, while eschewing more on-the-ground tools. Sadly though, your first post-MBA job usually isn’t as a visionary CEO – you need to work in the trenches. And Excel modeling is an important tool to obtain actionable insights for your company. Thankfully, Excel training was a key part of the IIMA syllabus from the very first term – something that helped students hit the ground running in their first jobs, and differentiate themselves from recruits from other schools.
These were my academic learnings from IIMA. Some of my friends highlighted HR, Communications, etc. as subjects that helped them understand how to work with teams better. However, I’m unable to separate the influence of these subjects – I think I learnt far more about people management in my first job. I may be biased, but I’m going to leave them out.
Right, let’s move on to the more interesting stuff, shall we? What else did I learn, outside the classroom?
6. Time management and prioritization
One thing that hits you very soon after you start at IIMA is the ridiculously false sense of urgency to everything. You have a surprise test on your very first day of class (not very surprising – evidently happens every year). You have a submission or two in your first week, and a group submission (with people you hardly know) within the first two. And this pace doesn’t let up for the whole first year.
Apart from making you shake your head in disbelief, this also helps you learn about your limits, and how much more you’re capable of than you assumed. Functioning efficiently on 3-4 hours of sleep for days on end, juggling multiple submissions on any given day or running from one end of the campus to another to get your submission in before the deadline – all of these teach you how to manage your time and get things done. And the next time you face a real life crunch, you have the confidence that you can deliver, even on two hours of sleep.
7. Importance of team work
Team submissions are an important part of the syllabus, accounting for a major portion of one’s grade. If the case-based instruction approach and open book problem-oriented exams aren’t enough motivation to snap out of bookish learning, then the assignments force you to work in teams – even if you’re narrowly interested in scoring marks, you need to work with other people. You need to extend yourself to paper over their weaknesses, as surely as they do to mask yours.
Clichéd as this may sound, working with others under constant pressure teaches you a lot about yourself and your weaknesses in team settings, giving you a chance to improve and be more ready for the real world.
8. Always strive to be around people you can learn something from
This was a very strong personal learning for me. After doing quite well academically in my own small pond, I had delusions going into IIM about how well I would do there. The first month was quite a brutal wake-up call – everyone around me was much smarter. But after the initial shock of this new normal had subsided, I actually started learning a lot from them. Those two years became a time of huge personal growth for me, and I resolved to (a) always be learning; and (b) always be around people I can learn from.
It’s serving me fine so far – there’s far more opportunity in this big sea than in my small pond.
9. Perspectives can shift very easily
One thing that surprised me during my stint at IIM, especially the first year, was how easily people’s frames of reference changed. Just like the famous Stanford prison experiment, the artificial pressure changed people into strange beasts. Perfectly genial guys stopped sharing their course notes and otherwise calm folks couldn’t sleep nights, all agonizing over one measly relative grade that may or may not influence your future career (it hasn’t yet, in my case). It was incredibly hard to retain perspective. But this was, after all, just a 2 year academic course that YOU paid for, and you’d already crossed the biggest barrier to getting a great job (i.e., getting into IIM). So chill out, and focus on learning and making friends for life.
Luckily for me, I had very grounded friends in my dorm, who couldn’t be bothered to get too tense about a surprise test or a term-end exam. We all did well academically, but without losing our cool. For that, I’m thankful.
10. You can game your way through anything. The question is – do you want to?
Rigorous though the B-School curriculum feels, there are ways to fraud your way through. The 80-20 rule applies, and you can easily get a half-decent grade without studying too much. I’ve not studied at an IIT, but I’m told that’s not very different either. Honestly, the grades don’t matter – so it’s fine either way. But what matters is whether you want to learn, or you’d prefer to rest on your laurels. You’ll get a good job anyway, sure, but your professional approach gets molded in these formative years.
Of course, I’m seemingly imparting sage advice now, but even I joined a management consulting firm from campus – something Paul Graham of Y-Combinator advises you to do only if your true calling is gaming the system. I don’t fully agree, but I hope I’m making amends now by voluntarily struggling.
Those were my learnings from B-School – concepts I apply in my daily life of which I can genuinely say – Yes, I learned this at IIMA. Would love to hear your thoughts – what did you learn from your B-School stint? Comment here, drop me a line at firstname.lastname@example.org, tweet at jithamithra, or heck, write your own blog post and send me a link. Look forward to hearing from you!