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Putting the ET article on “Double MBA” into perspective…

March 23, 2012 3 comments

Ever since this article was published in the Economic Times today morning featuring my story… I was surprised to see so many compliments coming my way and not to mention, some brickbats in the general media.

In all this unnecessary attention, I think the whole message was lost and hence I found it important to put things into perspective.

Pursuing a second MBA is not prescriptive for everyone but is very circumstantial – dependent on what career aspirations one has, their journey thus far, and its timing. If someone has graduated from IIM and have got into a career that he/she is satisfied with and see no reason to accelerate or change anything about it, there is no question of even considering another education stint. However, if someone feels the recalibrate their careers and update their management toolkit (this is often the most important reason for people in the current times), then MBA or maybe another specialized masters might be the way to address that.

Also, it is no way to question the caliber of IIMs. As I have professed time and again, IIMs do a great job at what they are designed to do. And in no way is it an apples-to-apples comparison to peg them against the ivy league schools. Each system serves a different purpose based on different fundamentals. IIMs are there to take in fresh undergraduates and equip them with a broader management toolkit that is more general in nature and softens their technical skills from undergrad. And sometimes, that isn’t sufficient enough to propel one all through their careers thereby meriting a second stint to build an advanced toolkit. In contrast, international business schools assume that incoming students have that general management toolkit through their pre-MBA careers (often 4-5 years of work experience on average) and that they need to bridge that gap required to get into a specialized management role. You can refer to my other article dedicated to this conversation: IIMs vs. Ivy League MBA Programs

A constructive inference from this news article (which I would have expected from the article author) should be that:
(a) MBA aspirants who haven’t embarked on this journey should understand the differences and make the right judgment – get to IIMs right after undergrad or work for a few years and then explore international schools;
(b) Professionals who already have an MBA can see this as an option ahead of them to recalibrate their careers, only if necessary.

Finally, this isn’t a new trend at all… there are a number of IIM graduates who have been going the “Double MBA” route. One such instance has been Pepsi’ Indra Nooyi going to Yale after her first MBA at IIM Calcutta.

In response to the Economic Times article titled Road to successful global careers: ‘Double MBA’ is becoming the next big tag

IIMs vs. Ivy League MBA programs

February 26, 2012 11 comments

Following up on my earlier posts about my MBA experience… I have often been asked about what the distinction is between the Indian Institutes of Management (IIM) and Ivy League business schools here in the U.S.

Before you get into the differences, it is important to understand that IIMs and Ivy Leagues are great schools in their own respect. I have definitely gained from both these schools, and perhaps would have not been where I am today if I hadn’t been to either of these schools. That being said, these schools serve different set of objectives which results in significant differences, some of which are outlined below (again my IIM experience is from more than 5 years ago so might not reflect current circumstances):

1. Student academic profile: IIM is designed to educate students coming with minimal work experiences, often right out of their undergrad schools. An Ivy League school (will use Columbia just for contextual relevance) typically attracts students who have on average 5 years of experience after undergrad.

2. Student professional profile: IIM tends to be filled with engineers and commerce grads (not by design but by expected standards) while Columbia has huge diversity in terms of student professional backgrounds, from the standard bankers, consultants to writers, musicians, teachers, social workers… in great numbers.

3. Curriculum: By virtue of the above two points, IIMs tend to focus on providing a good breadth of management skills to students thereby focusing on basic fundamentals across several areas of business operations. This means there is minimal coursework focused on specific industries. At Columbia, knowing that students come with significant background in specific industries and might want to build advanced skills to go back to the same industry, the curriculum is super-diverse in terms of offering a good depth and breadth across all areas of business. What would be discussed as a session in an IIM elective (e.g., options pricing) would be a full-term elective at Columbia.

4. Faculty expertise: Academia in India culturally have evolved to be purely academic alienating themselves from industry. And this also becomes a huge difference… Back in IIMs, the senior faculty members (often the most revered ones) have moved out of industry to start teaching a decade or more ago and stupid HRD ministry rules not allowing simultaneous work in the industry results in a very theoretical pedagogy. Often the cases and anecdotes you hear are from ages ago. However, in Columbia, what you see is that a majority of the faculty members (easily around 80-90%) are still active in the industry and are able to bring their experiences to class in real-time. This makes a big difference to our learning esp. as we endeavor to go into the very roles they have been through in their professional, non-teaching careers.

5. Recruiting: This is one point where IIMs have made rapid strides to bridge the gap with Ivy League schools. However, still how you see the gap between IIM-A and other IIMs is the kind of gap you see between Ivy Leagues and IIM-A (and other IIMs). I have always felt that recruiting is like a capitalist system… IIM-A being the oldest school in India had the privilege of having its alumni reach top positions in the Indian industry and being its alumni, they have been biased towards hiring more from their alma mater. So, other IIMs coming later on, had to play second fiddle in getting their graduates into these organizations. Now, when it comes to IIMs vs. Ivy Leagues, the same mechanism is played out at a far-bigger, global scale. And what you see is Columbia commands immense power with employers. A leading strategy consulting firm (you can fill in any name you want) hires only a handful from IIMs yet comes to Columbia and hires easily 10x of that number.

6. School resources: This is often not discussed or considered important but it is amongst the top 3 important differences for me… IIMs being at a small scale with campuses spread far and wide have resulted in resources also being split. So, hosting just around 600-700 students implies having fewer resources (just the game of per capita numbers… if 1000 students have access to $1Mn worth resources, 10,000 students have access to $10Min worth of resources). The libraries are very basic and so are other resources (although IIMs do a great job of managing these resources). In contrast, Columbia being part of a larger Ivy League university setup can offer a much more wider array of resources… which extends into the curriculum (you could do coursework specific to your industry interest in specialized graduate schools) and into the faculty (you could learn from teaching events / discussions with faculty from other schools) also.

7. Alumni network coverage: Playing the scale and age effect (like in recruiting and school resources), Columbia commands a more diverse and well-established alumni base globally while IIMs can boast of the same kind of network only within India. As more and more IIM alumni are exploring overseas career opportunities, this is turning out to be a big hurdle (in fact, ISB is also going through the same problem) as often recruiting decision makers outside India are not aware of the caliber of IIMs and often club IIM graduates with other regular business schools.

8. Location: With a very few exceptions, IIMs are located in such random places that there is no access to any resource of importance outside the campus (I was @ IIM Lucknow and can say with certainty that there was nothing of professional importance to students outside the campus boundary). In contrast, if you look at Columbia, being in New York provides immense advantages professionally and personally. Professionally, one can engage in term internships while studying, network with companies they wish to recruit for, attend professional events (conferences, seminars, etc.), and also undertake community service by engaging with non-profits in and around New York. Personally, if you have a significant other (spouse), it is far easier for them to find professional opportunities here than what would be the case with IIM campus locations.

In summary, while IIMs are serving a different purpose resulting in some structural differences, they are not yet ready to give a stiff challenge to Ivy League business schools. And not to forget, the political intrusion in IIMs have only made me less hopeful about any constructive change towards bridging this intellectual divide.

Should you want to read some of my other MBA experience-crelated articles from my blog, here are the links:
Going for a second MBA
First year at Columbia Business School… the highs and the lows
New York reporting…

In converation with the IMF General Counsel

February 18, 2012 1 comment

This is based on my understanding after a candid, off-the-record conversation with Sean Hagan, General Counsel of the International Monetary Fund (IMF), wherein he shared the latest economic challenges and the road ahead for IMF.

The current economic turmoil is unprecedented with the “crisis in emerging economies” shifting to a “crisis in the advanced economies”. Today’s world is upside down. And we are at a time where IMF is seeking finances on a large scale from emerging economies (you heard it right!) to create a firewall to save these advanced economies.

And a global problem such as this needs a global solution. In a typical situation, when capital markets dry down, the economy naturally reacts with a currency depreciation but in the current European crisis (esp. Greece as a case in point), the challenge for these local economies is that they need to stay in the euro zone so there is no chance of currency depreciation… however, there is an alternative of private debt restructuring and internal devaluation i.e., lowering domestic prices, which could result in more pain for the local economy.

IMF plays a catalytic role to get foreign creditors to refinance loans without changing NPV of their claims. This has previously worked in Brazil and Mexico but in this case, the debt level is so “unsustainable”. In this case, IMF is precluded from providing any financing unless debt becomes sustainable so the country seeking IMF funding has to go through a “free default restructuring” to avoid defaults. In this case, IMF ensures that the borrowing government and its creditors follow the same macro-economic assumptions as prescribed by IMF. This is very controversial in that IMF has to tailor these assumptions on a case-by-case basis and not everyone would be in agreement with these assumptions.

At the same time, IMF is also advocating preventive strategies whereby they support through an LC (Line of Credit) without having to use these funds. This is where IMF is seeking augmentation of EFSF by $500 billion as a demonstration effort.

Sean Hagan suggested 4 key actions that EU should pursue:
1. Create a single euro supervisory authority to license and authorize cross-border banks
2. Create a resolution authority to wind down insolvent banks
3. Set up a single deposit insurance fund
4. Provide immediate liquidity from ECB

The main message was that markets need to regain confidence in the global economy. And when Sean Hagan was asked this very natural question that whether IMF should consider reverting back to the GOLD standard to build this confidence, Sean feigned lack of a thought to respond to this.

Preparing for a consulting case interview

November 27, 2011 2 comments

Having been through the interview process with all the top-tier strategy consulting firms notably McKinsey, BCG, and Bain, I got into the role of advising my peers at Columbia Business School on preparing for such interviews.

Over the last few days, as I do these practice case interviews, I realized that it would be more efficient to create a standard checklist that I can then use to base my feedback on. While the checklist is more aligned with a particular case I have created to give a holistic feel, I think this can be relevant in a general context as well. And some of the tips could evoke a WTH! kinda response also but the idea is to be as comprehensive as possible to appeal to users at varying stages of interview preparation.

For the purpose of this post, I will use a specific case to make my guidelines easier to understand and implement.

Here goes the checklist…

1. Use blank white A4 papers in landscape mode
The idea behind this is that your work should mimic as if you’re working on a MS-Powerpoint deck.

2. Number your pages beforehand
Sometimes interviewers may notice it and regard you as being very structured.

3. Once the interviewer gives the case brief, recap key information to make sure you got everything correctly. In case of long case briefs, make sure you’re very crisp and succinct without relaying the complete brief verbatim to the interviewer.
Case brief given: Our client is Navigant Advisors, a retail brokerage firm doing $5Bn revenue in 2010. It has 200 branches in the U.S. of which 100 are corporate owned and the remaining 100 are franchised. We have been retained by this client to help them understand the economics of the business.
An illustrative recap would be: Navigant Advisors is a $5Bn retail brokerage firm looking to understand the economics of its business and has a 50-50 split for its 200 branches amongst corporate owned and franchised.

Read more…

An oil company’s outlook for the energy industry

October 10, 2011 1 comment

This is based on an excerpt from a session by Hess Corporation’s Chief Stategist.

Early 2011 overview:
– Long-term fundamentals in oil are robust; investing in 20- 30 year time frame; worried about long-run oil price (in 5+ years)
– Downstream: Large refinery in British Virgin islands – once people see uptick in margins, then people chase those margins. Only 1 in 7 years provide good margins! We are not going to make good money in the refining business for the next 5 years. Optimized 500,000 barrels a day to 250,000 barrels a day.
– Natural gas – more exciting hydrocarbon. This is an absolute game changer for the U.S. Today one of the top 4 resource holders in the world.
– Power generation: all incremental natural gas demand in the U.S. comes from the power sector. The largest and the fastest growing energy sector in the world
Read more…

Limited-Purpose Banking… taking lessons from Islamic Finance

September 26, 2011 2 comments

This is a Forbes’ article written by Laurence J. Kotlikoff and Edward Leamer, professors of Economics at Boston University and UCLA.

Banking System We Can Trust
Turn all financial firms into mutual funds.

Before throwing more money at Wall Street, let’s understand what our financial system was supposed to deliver, what it did deliver and what price it charged.

The system was supposed to channel our hard-earned savings into the best real investments: new homes, offices, factories, equipment and research. And it was supposed to correctly price our assets.

It did neither. Instead, Wall Street morphed into a vast gambling enterprise, generating massive trades of existing securities without, in fact, raising the investment rate or growing the economy.

During the dot-com bubble, Wall Street funded all manner of silly businesses, and during the housing bubble, it put millions of people in homes they couldn’t afford. This “expertise,” which cost one-tenth of our output, was delivered by the best and brightest, with half of Harvard’s graduating classes becoming high-class croupiers.

As for pricing assets, the stock market’s been on a five-decade roller coaster, notwithstanding a relatively stable real economy. The market rose dramatically from 1950 through the mid-1960s. It then spent the next decade and a half falling through the floor. Then it rose like crazy in the late ’90s, crashed, soared and crashed again.

We need a financial sector but not one like this. Nor do we need Wall Street hitting us up for its gambling debts. What we need is Limited Purpose Banking (LPB), which would transform all financial corporations, including insurance companies and hedge funds, into mutual funds. They would, henceforth, be called banks.

Under this system, banks would never fail for a simple reason. They’d never hold any financial assets and they’d never borrow except to finance their mutual fund operations. Instead, they’d be limited to their legitimate purpose–financial intermediation. Under LPB, people, not companies, bear risk as their mutual funds do well or poorly.

A new Federal Financial Authority (FFA)–would rate, verify, supervise custody, disclose and clear all securities purchased, held and sold by LPB mutual funds. Private rating companies could stay in business, but no one would need to trust them ever again. Read more…

Call for a fundamental change to the existing global financial order

September 26, 2011 1 comment

At the World Leaders Forum organized by Columbia University, Dr. Ahmad Mohamed Ali Al-Madani, President of Islamic Development Bank, shared insightful perspectives on the looming international financial crisis, the excessive reliance on debt as the achilles heel for the global financial order, and the way Islamic Finance can offer great ideas to completely overhaul the global financial system.

Five key principles that were defined as the cornerstone of a sound financial system are:
1. Increase share of equity and reduce share of debt in the total financing of economic activities
2. When the need of debt is justified, it should be extended on the basis of sound due dligence that includes logical risk-reward considerations
3. Credit should be confined primarily to transactions that are linked to the real sector to ensure that credit expansion moves more or less in tandem with the growth of the real economy
4. All financial institutions, not just banks, need to be properly regulated and supervised so that they remain healthy and do not become a source of systemic risk
5. Respite should be given to debtors who err in real distress beyond their control – the giving of respite in such circumstances along with necessary restructuring that Islamic Finance requires will help reduce risk of asset price reduction caused by forced liquidation/ acquisition of borrower’s assets

It is also important to note that the principles of Islamic Finance are not specific to the Islamic faith – they are part of all divine religions and also secular paradigms. The underlying principles of Islamic Finance have been described as ethical and universal.

This becomes all the more relevant in the current times as various forums (G20, IMF, World Bank, Central Banks, EU, etc.) are thinking about how to stop this financial contagion but are limited in their thinking to just merely making some tweaks in the existing order. Islamic Finance offers a radically different alternative that can mend this systemic epidemic. As the Economist noted, “the world needs new ways of thinking and the risk involved therein”, Islamic Finance offers basic principles for this very purpose.

Some western economists and finance experts have begun to understand the merits of the Islamic Finance system. A notable mention is the work done on “Limited-purpose banking” by Prof. Laurence Kotlikoff, Former Senior Economist on the President’s Council of Economic Advisors and currently an Economics Professor at Boston University. More on this subject in a separate post.