In the beginning of the class my group was to present a skit based on that day's case. The case was about Karen Leary (another Harvard Business School/HBS favorite), a branch manager at a Merrill Lynch (my former employer) brokerage office, struggling to find common language with her new Taiwanese subordinate, Ted Chung. Our task was to show the problem she was facing and offer a possible resolution. It was amazing how just a few well-known theatrical tricks made our presentation lively and entertaining. The class was laughing and each of us had a few classmates and the professor come up afterwards to praise our skit. What did we do? We had a PowerPoint announcing the scenes and actors, instead of having a narrator. The title slide had white Rocky punching a black boxer. I was acting as Karen and instead of having a conversation with Ted directly, I was talking on the phone to a management consultant, explaining the situation, and receiving his advice on changing my strategy with Ted. In the next scene, I gave my jacket to one of our Indian guys and he was now acting as Karen, underscoring her transformation after the conversation. Ted, seeing the "new" Karen, asked: "Karen, is that you? You look different." - "Thanks, Ted, you look great, too." replied "Karen." The class cheered. At the end we also offered an alternate ending, without the consultant's intervention, with me, the "old" Karen, pointing the finger and saying "You are fired" to Ted, Donald Trump style. That was so much fun!
Then, we were given a case about car racing. To summarize: a team can choose to race or not in this last race of the season. If they race and end up in the top 5 (50% chance), they'll make $1.5M; if they race, but do not end up in the top 5 (12.5% chance), they'll make $.5M; if they race, but blow their engine (37.5% probability), they'll end up with $0. Finally, if they choose not to race, they'll make $.5M. The story was more elaborate and well written, but that's the gist of it. The manager is trying to figure out why they have such a high chance of blowing their engine, and the mechanic thinks that it has something to do with the outside tempreture - cold weather is not good for it, however, he could not explain why. Current tempreture is 40F; however, the graph of what tempretures the engine failures occurs shows that they had engine failures pretty consistently across a range of tempretures. Should they race or not?
Then, we were given another sheet of information: the manager found out that the graph of engine "successes" vs. temperature was more conclusive - there were no successful races under 65F. Should they race or not?
We talked about it in our group and came up with a decision. Then, the professor, supported by one of our students, an Aero-Astro major from MIT, told us that this situation was actually taken from the decision process during the launch of Challenger. They had that same data about temperatures, but the desire to launch/race and the possible rewards for a successful launch were too great to overcome or allow them to think clearly.
We were discussing the theory of the firm: the model of production analysis, laws of dimishing returns and the like. The big surprise to me was that the class/textbook/professor chose to limit the use of calculus in describing the financial models, focusing on the pictures/graphs instead. I quickly found myself trying to come up with formulas and taking derivatives to get the intuition behind these graphs. I am definitely analytically inclined - I'll take formulas over graphs and pictures anyday. Plus, you can do so much more with analytical functions... Apparently, there is a large portion of the class that does not feel comfortable enough with calculus to benefit from its use. Too bad.
A noteable mention goes to Wassily Leontief, a Russian-born (1906) and Russian-educated (University of Leningrad) Nobel prize winning economist, whose prize winning work was completed at Harvard. And there I was, hoping for an actual Soviet contribution to economics ;)
On the more interesting side, the professor shared with us the implications of his current consulting gig - reforming the tax system of the city of Philadelphia: Economists shake up city, one report at a timeThey haven't been elected to office or even appointed, but they keep popping up all over the place. This year, the economists from Econsult Corp. have found themselves at the center of some of Philadelphia's hottest public debates. (in the Philadelphia Inquirer).
We went over the treatment of accounts receivables. How is the firm supposed to account for future refunds, returns for store credit and uncollectable accounts? According to the matching principle (record revenues together with expenses), you would want to record these at the time of sale, but how can you know the amounts ahead of time? As always, there is a lot of leeway the firms have in terms of the accounting methods on this. For instance, BJ's and Costco used to record the full cost of their membership sales in the month they were sold, even though the memberships can be returned for a partial refund throughout the year. Membership sales constitute a sizable percentage of their revenues, so the overstatement of revenues and increase in the profit margins was quite strong. The SEC finally stepped in and made them review the accounting practice.
I am still trying to find "the right way to do Wharton." Should I socialize more or do more in terms of the program's core components? Should I make myself mingle and meet with new people or stick to ones I like more? Should I worry about grades, even when it does not affect actual knowledge (e.g., trying to earn a good the class participation grade in accounting)? Does the knowledge itself matter in all classes - should I be trying to get the most out of all the classes, or just try to get the necessary/basic concepts with minimal effort (e.g., how much time should I spend on accounting, which is hugely time-consuming, but not, strictly-speaking, that interesting or relevant for me)?
For now, I am sticking with get the most knowledge and best grades, interacting with others while it is enjoyable, but not pushing myself when I don't feel like it. I'll see how this works out at the end of the semester, but for now it means studying on a daily basis - I realized that I haven't been doing enough before.