Saturday, January 3, 2009

1st Semester Summary - "The Numbers Classes"

"So sayeth the data" could easily be the mantra of any MBA program, and for good reason. While previous generations of business had their fair share of data to collect and numbers to crunch, today's world of data has exploded with the connectedness of networks, computerized analysis and a willingness of companies to share their data via APIs (Facebook, Twitter, Google, Yahoo, Amazon, etc.). But behind all of this data analysis are still the fundamentals of Financial Accounting, Quantitative Methods and Managerial Economics. These three courses make up what I called "The Numbers Classes" in the 1st semester. For most MBA students, these were either love or hate classes, depending on your predisposition to mathematics and problem solving. I tended to follow more on the love side of the spectrum, although I will deny all claims to "love"'s a black magic that still leaves me scratching my head.

Without going into great detail on these classes, several themes and lessons did emerge from the coursework:
  1. There are lies, dam lies, statistics and then there is accounting. For anyone who believes that accounting is a cut & dry, boring, purely numbers crunching exercise is sorely mistaken. As we've learned over the past 10 years, accounting can make or break companies and economies if not understood and monitored properly. It is a science that is grounded in principles and rules, but the shades of grey between those two is enough to fill a 64 box of Crayolas. For managers at any level, it is critical to understand how your company manages their accounting, and how your work impacts the accounting and results of your business. It was incredible to watch all the subtle ways that Balance Sheets, Income Statements and Cash Flow Statements could be affected by decisions that could be viewed as proper or improper, depending on which shade of grey-colored classes you happened to be wearing that day.
  2. Anyone can generate or collect data, but only those that can use it to communicate important concepts or make critical decisions will ever be paid to analysis that data. Standard Deviations, Normal Distributions, Probabilities, Pricing and Stocking via Critical Fractiles, Confidence Intervals, Variance, Regression Analysis - all of these quantitative methods can either make your head hurt, or make you appear to be a genius when trying to analysis the data related to your business. More than anything else, Dr. Boone's course provided an outstanding introduction into critical thinking.  Considering how complex and critical quantitative analysis has become in modern business, I actually wish this class had been slightly longer so we had time to cover some of the more complex topics in more depth, but for now I feel like I have enough of a foundation to apply to the rest of the courses in the program.
  3. While every manager would probably prefer to take a long-term approach to their work, the reality is that much of our work is short-term and succeeds or fails based on our ability to live "on the margins".   Managerial Economics provides an alternative look at the data and accounting for business, by looking at what marginal value, cost or utility our next decision or action will create.  For some people it seemed like a way to manipulate decision making because it didn't always deal with real costs or revenues (just the next cost or revenue), for for others it provided a clearer picture of how to analyze the options between decisions.  The techniques learned in this course are definitely something that we'll build upon in later classes. 
No matter how much anyone wants to talk about vision, leadership or strategy, the fundamentals of any MBA program (or analysis) is the data.  It provides a foundation from which to look at both sides of a decision, as well as to create relative comparisons vs baselines, history and predictions.