Wednesday, November 30, 2005

Execution vs. Strategy 
Interviews are officially over.  I think.  I just finished a pretty tiring day of 8 interviews at an operating company in Houston.  Now I’m sitting on a packed Continental Airlines plane approaching Boston, and I’m going to be wiped out after this.  The bad news is that I have major work to do for my paper in International Financial Management and I need to make the most of the 40 or so hours I have in Boston before Jie and I leave for Chicago on Thursday afternoon.  So, my free time will be spent in the library over the next few days as I try to get up to speed on this assignment.

One of the major issues I’ve been thinking about over the last month has been this issue of Execution versus Strategy that my MSO professor raised in class just before Hell Week.  She asked us to write down whether we preferred Execution or Strategy, and then also estimate what percentage of our classmates agreed with us.  I wrote down execution and 60%, thinking that sounded about right, but I was off a little, the class favored Strategy 60/40.

Anyway, as I consider whether to begin my career in consulting or operations I’ve been wondering a lot about that question.  There is no doubt in my mind that execution is where the real value is created in a company.  However, it just may be that I am better at the Strategy side than the execution side.  Case in point: My Dynamic Markets class (or investing in general), where I am great at creating trading strategies (or picking stocks), but I usually botch the execution and leave a lot of money on the table.  Of course, those are both pretty harsh tests, since not many execute well when it comes to the market.

I should find out about this operations job over the next week or so, basically over the same time frame that I will be visiting consulting firms in Chicago and Houston.  I am hopeful that I will have a decision by Christmas Day, but I’m not sure it will be much earlier than that.

Saturday, November 26, 2005

Exhaustive Update 
This week Jie and I have been back in Texas for Thanksgiving.  We booked our flights early this time and so we got a good deal on them, and then it turns out I have a 2nd round interview on Tuesday and so my flight will be reimbursed as well.  Woo hoo!  Every time we are in Texas we do the Houston-San Antonio-Austin triangle in some order, which makes for a lot of driving while we’re back.  Luckily, my step-dad is always nice enough to loan us his car so we don’t have to pay for a rental.  The complications occur over Christmas when we are back for over two weeks, it’s tough to borrow someone’s car for that long…

Yesterday was a major scare on the college football front.  I was about to go in some sort of catatonic shock with the way my Longhorns were playing against the Aggies.  Luckily, we pulled out the win anyway, and this will definitely be motivation for next week against either the Cyclones or the Buffaloes.  In fact, given that we won the game, this was probably the best thing that could have happened.  It takes the Heisman pressure off Vince, gives us motivation for next week, and it was a moral victory for the Aggies, who were in desperate need of one.

One exciting development this week has been the planning of a trip to Chattanooga, Tennessee with my brother and Dad to see the Division I-AA National Championship game on December 16th.  I was able to change a previously made AirTran reservation (they bend over backwards to deliver customer service some times, and other times are incredibly obstinate and difficult to work with), and will meet my Dad and brother in Atlanta where we’ll rent a car to drive to Chattanooga.  It should be a fun trip, and it means that I should get to attend the Division I-A and Division I-AA National Championship games in the same season.  Many pictures and contrasting impressions will be forthcoming…  (First point, ticket for the Rose Bowl: $175, ticket for Davenport Field in Chattanooga: $20.)  The trip is actually my graduation present to my brother, he’s excited about it because his Texas State Bobcats are in the I-AA postseason for the first time, and they have an excellent shot at reaching the National Championship.

The big story in my life right now outside of the job decision process is the short fuse I have on my papers for my two paper classes.  I am getting dreadfully behind on both of them, and need to really focus over the next few weeks to get things taken care of.  Complicating things has been the fact that my laptop battery has basically died, it lasts only about 45 minutes now, making it impossible to get work done on the various plane rides I’ll be taking over the next few weeks (I’ll be in Boston for only 10 of the 19 days between now and Christmas Break).  I finally caved and bought a new battery from IBM, shelling out $160 for an extended life battery.  I’ll try to limit the use of the new one to travel so I don’t end up ruining it in a year like I did this one.

Thursday, November 17, 2005

Brought Down the Class 
So it turns out that I was a little modest about my role in the blow-up in Dynamic Markets on Monday.  The way the simulation was designed the price of this one stock that many people were shorting was supposed to go from 10 to 16, thus likely liquidating one or two players and pushing the stock up to about 32 as they buy to cover their positions and in the process sinking a few other funds.  It would teach everyone a lesson and set up a nice lecture.

Enter Mark, lone trader for the Bringing Down the Class fund.  I was short about 7x more shares than any other fund, and about 8x more than the professors thought anyone would be dumb enough to hold.  When the price of this shorted stock moved from 10 to 16 I was liquidated, and due to my liquidation alone the price shot up to 112, far above the 32 the professors were planning on.  Now, since in about a second I took the price to 112, about 9 other funds liquidated.  The liquidation of those funds pushed the price to around 450 and caused four more fund liquidations, effectively sinking funds that only had a few percent of their portfolio in the position.

In a very real sense I recreated almost exactly what happened in When Genius Failed.  Yesterday my teammate, who unfortunately will be suffering the effects of my trading along with me, forwarded me an e-mail I sent to him the night before the trading simulation.  The last line?

“…Those [trades] are really risky, so I can’t go too deep in them.”

Tuesday, November 15, 2005

Book Report - Freakonomics 
Yesterday I finally got my hands on a copy of Freakonomics, that book supposedly about economics that has been all the rage since it came out six months ago or so.  It’s a quick read, I finished it late last night while watching the Cowboys pull one out against the Iggles.  I have to say that I found it to be a disappointing book.  Sure, it’s filled with interesting anecdotes and a different way to think about the world, but I don’t think it makes enough of an impact to actually change the way you think.

The obvious comparison would be to Tipping Point, which I read last year.  TP presented a new framework for thinking about trends and how they catch on, and thus is a really practical and useful way to think about the world.  Freakonomics, on the other hand, is written in somewhat the same style but I would be hard pressed to say the thought approach Levitt takes is novel.  Rather, it reminds me a lot of some of Carl Sagan’s books, which take the same skeptical approach to interesting problems.

All this isn’t to say that Freakonomics isn’t fun to read, because it is.  However, the really interesting stuff is in the anecdotes and not the approach, and you might as well just read a one-paragraph summary of the anecdotes and not 20-25 pages for each one.

I even read When Genius Failed! 
I think I’ve mentioned my Dynamic Markets class before.  It’s the class I’ve nicknamed Competitive Finance, because we basically use financial concepts in a “real world” trading setting to compete with our classmates for profits.  Anyway, over the last few weeks it’s moved out of the finance arena and into a more pure trading world, which has been pretty fun.

I don’t want to talk about the exact subject matter of the class in case anyone who takes it next year is reading.  Last week my partner was running the trading while I ran the spreadsheet.  He is pretty conservative when trading, and we wound up with only about half the gains of the leaders.  This week, though, he was in NYC for interviews and so I was left to trade our account myself, and I wanted to finish in first.  Well, it turns out that a conservative diversification strategy like my partner pursued would have been a good strategy, as I got aggressive after falling behind early and got heavy into several deals that eventually exploded.  Perhaps our name should have been Short Term Capital Management after all, because I grew our portfolio roughly 3x and then ended up at -6x.  Yes, as in liquidation of the positions and negative equity.

Lesson learned.

Sunday, November 13, 2005

Paper Classes, nice for now... 
Tomorrow marks the first day of the semester where I don’t have classes in the courses I am taking that require papers.  At HBS 2nd year classes either have 20 or 29 sessions, depending on whether there is a paper or a final.  I have two paper classes, both of which are on X days (M/T/some W), so from now on I have only one class on Monday and Tuesday.  Of course, I’m supposed to spend that time working on my paper, so it’s not really a free lunch.

In Strategy and Technology I am in a group writing a paper on Sirf Technologies, a company with some cool IP in GPS that it is trying to sell into cell phones, automotive markets, and the like.  We’ll be investigating their business model to see if they can succeed in carving out a niche and profits with their IP.

In International Financial Management I’m writing a paper on personal investing in international markets and whether it makes more sense to go with actively managed funds in less developed markets (read: less efficient) and index funds in well developed markets.  It’s a huge subject, so I’m trying to carve out a spot that will make for an 8-10 page paper and can get researched and written in less than 40 total hours, which is the standard for individual papers in that class.

Thursday, November 10, 2005

The blight spreads 
It seems the great grade disclosure debate is now moving to HBS.  For an excellent summary of what has happened thus far see this article from the Harbus.  Here’s my response to the administration’s reasoning:
  1. Recruiters want to know grades – Personally, I really don’t think this is true.  Recruiters know that when they come to HBS they are getting someone with the required mental horsepower to get the job done.  If not disclosing grades actually changes recruiter behavior then why are interviews run exactly the same at HBS as they are everywhere else?  In the end, recruiters who come to HBS want to select the ideal few students for their firm, and that generally means the students who are really interested in the opportunity and have the skills and experience necessary.  Grades have nothing to do with that selection process.

  2. Career Changing Students want to reveal grades – As a career changer, I think this is complete BS.  I really don’t want to disclose grades because I want the freedom to try new subjects, take risks at school, and focus on recruiting even when that may cost me in the classroom.

  3. Disclosing grades will raise the level of effort in the classroom – I actually agree with the administration that this will happen, but I don’t think the associated benefits of disclosure will outweigh the costs.  First of all, only students who don’t come in with offers to return to their old firm will care at all about grades, so the full student population will not be affected.  Aside from that, the downside of increased focus on schoolwork means less effort on social events, recruiting, clubs, organizing events (both Treks and Symposiums), etc.  In other words, the richness of the HBS experience will be diminished.  Furthermore, disclosing grades discourages cooperative behavior and a relatively uncompetitive atmosphere.  I fear that disclosing grades will cause a return to the kind of cutthroat behavior that matches a reputation HBS has worked very hard to shed.

I know the likely responses to my arguments, primarily that schools with disclosure still have social and school events and so forth.  However, I feel that the mandatory attendance policy combined with 1st year honors and Baker Scholar accomplishes all the disclosure that is necessary.  Stay tuned for more information, I’ll be tracking this issue closely at HBS, as I feel passionately that disclosing grades (even under an “optional” disclosure model) will be bad for the school.

Tuesday, November 08, 2005

My least favorite time of year 
Now that Hell Week has come and gone I’m starting to get in the difficult business of making decisions.  Long, long time readers will remember the irritating back and forth surrounding the HBS/Stanford decision, while long time readers will remember the angst over the summer internship decision last year.  Clearly there is something wrong with my massive-life-changing-decision making process, but I don’t know what so I guess I’ll keep banging my head against a wall trying to figure this out.

Anyway, the first decision is whether to go back into operations or spend some time in consulting.  I think I’ll probably only end up in consulting if I think I will be there a long time, perhaps 10+ years, so it’s not exactly an easy decision to make.  If I choose operations, which is pretty likely, then there is only one job that I have my eye on.  If I choose the consulting route, though, then I have to make another decision around which firm to go work for, which involves issues like travel, geography, and firm culture.
This uncertainty always drives me nuts.

Sunday, November 06, 2005

I am Iron Man! 
I have a key addition to make to the short list of interview advice I posted the other day.  One of the things I can’t stand about interviewing is the fact that I have to spend so much time ironing shirts during interview week.  I only have a few interview quality shirts and ties (and my second suit is looking a little tired, so only one suit), so I spent a lot of time ironing this past week.  Jie and I had an old Black and Decker iron that she picked up in college for pocket change.  She had been telling me for a while that we needed a new iron, and an expensive one, but I didn’t really believe it.

Anyway, my average process time for a shirt was 10-15 minutes with our old iron.  Someone sent us a coupon for 25% off at Linens and Things, though, so we used that on Friday afternoon to go buy a Rowenta Professional DX-8800.  The iron was $75 after the coupon, which is a lot more than I ever thought I would spend on an iron, but good grief was it worth it.  Jie offered to break in the new iron to prepare my attire for my final consulting second round interview, and while she finished breakfast I managed to iron a few sleeves just to get a feel for the new purchase.  That thing is sweet!  It’s like the Porsche of irons, complete with smooth handling, lots of power, and made in Germany.  I bet I could iron two shirts in the 15 minutes it used to take me for one!

One final interviewing tidbit:  UBS was my hero last year because they did a second round interview in the form of a dinner, which I thought was really cool.  No trip to NYC, no stuffy suits, just dinner.  This year BCG gets props for holding a second round interview in business casual, though they did schedule me for a Sunday evening at their office in downtown, so I suppose there is a trade-off.

Saturday, November 05, 2005

Interview Ideas 
There are a couple of things that I would point to if someone asked me to explain my unexpected success this interview season.  Neither of these strategies is particularly unique or insightful, but they worked for me so I thought I would pass them on:

Thursday, November 03, 2005

Hell Week Update 
This has been a remarkably different Hell Week than last year’s, all for very good reasons.  First off, the weather has been absolutely perfect for trekking all over the place to interviews.  It’s been sunny and in the 60’s all week, which is about the best possible situation in early November in Boston.  It doesn’t seem like I am interviewing nearly as much as I was last year, though I do have 5 first round interviews this week as opposed to 8 last year.  I was focused on equity research and investment management the first time around, so there were a few more firms to talk to.  This year I am interviewing with consulting firms and one operating company, so there aren’t quite as many players.  

The biggest difference, though, is that the results have been much better this time around.  I’m still in the process, but I think I was dinged by a firm basically the first day last year, so this is definitely an improvement.  There is a very immediate payoff when you change from trying to get into an industry with macro trends that work strongly against you to one where the trends are strongly in your favor.

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