Tuesday, December 30, 2008

1st Semester Summary - BGE (Part I)

It's getting close to 2009, so I need to start moving this blog from flashback mode into real-time mode fairly soon, so I suppose I'll just need to summarize aspects of the courses from the 1st Semester. These will by no means be complete, but rather hit on some interesting highlights and augment my notes from class.

To start with, I may as well start with the first course we had in August, which was Business in the Global Economy (BGE). Seems like a simple enough topic, just Economics for the Entire World, including all the nuances of Interest Rates, Foreign Exchange Rates, Balance of Payments, Trade Deficits, International Joint Ventures, Global Trade Agreements, etc.. Come on kids, the deep end is over here and the water is warm, jump on in!!

The first thing that excited me about this course was the experience of Dr.Chuck Kennedy, who had previously taught at UVA Darden School and has mentors back at Harvard Business School, so he's well versed in effectively using the Case-Study method of teaching. The next thing I looked forward to was a lack of a textbook. This class was going to evolve out of case study and current events. It wasn't without structure, but it was going to be focused on the realities of the world, rather than primarily based on research.

In the first couple of classes, we covered several historical events that now seem extremely relevant given our current financial crisis. We started with Bretton Woods and how the Global Economy evolved after WWII up through the 1960s. We looked at how fixed-rate currencies affected interests rates, balance of payments and fiscal and monetary policies worldwide. We then watched at the oil and inflationary crisis of the 1970s forced the move to floating rate currencies, affected inflation and interest rates and subsequently led to the recessionary challenges of the 1970s.

After a couple weeks of BGE, and comparing the course to others such as Quant or Accounting, I explained to Dr.Kennedy that I was struggling to a certain extent to get my head around the myriad of levers that could affect change in the Global Economy, and wondered if there were some primers that I could reference to get a bigger picture of the interactions. With a very stern look, he simply told me, "I don't think you're trying hard enough. Connect the dots. Follow the flows of money. It's all there right in front of you. The case study method does not spoon feed answers to you, it expects you to explore and find them. Force yourself to ask questions of yourself and the class." This was a lightbulb moment for me not only about the depths of the course, but about the expectations of the overall program. I appreciated the gentle slap in the face (figuratively), as the method of teaching/learning had not yet completely sunken in for me, and this put things in a much better perspective. This was truly going to be a challenge, and one that I needed to step up for.

As the class progressed, we investigated the Debt Crisis in Zaire, the Debt/Currency Crisis in Mexico, an International Joint Venture in formerly communist Poland, and the breadth of economic impact that China is having on the world and many other topics that may be many years old but are finding ways to repeat their mistakes or lessons in other parts of the world.

I learned a great deal from this class, with this list being a small summary:
  • The Wall Street Journal, The Economist, The New York Times and several other global business publications are a completely different read now that I know which lens to focus with.
  • We talk a great deal about living in a global society, and how the world is much smaller now due to technology. But we've lived in a globally connected economy for a long time. It's just that now, the US is become less and less the center of that connectedness.
  • History continues to repeat itself, led by greed and short-sighted decision-making by countries and leaders looking to take advantage of a short-term situation (abundant natural resource, low interest rates, etc.).
  • Allowing your country to get significantly out of balance with your neighbors, trading partners and the rest of the global economy typically involves longer difficult times when the rebalancing occurs....and it always has to occur.
  • Economics does have a set of fundamentals, like other disciplines, but the results of influencing those fundamentals often have less than expected results. The science of economics is often clouded by human emotions of fear, greed, uncertainty and protectionism.
  • "Following the money" and "asking following questions" are the best ways to gain perspective on the global environment we live in today.
2009 is going to be an extremely interesting year to see how the US and the world address the global financial challenges we share. I'm looking forward to my trip to China in May to better understand their culture and economy. And I'm looking forward to viewing the world's interconnectedness through a completely different set of eyes.