Newsflash: VCs Ignore Business Plans

According to this recent article in the New York Times, venture capitalists care not for business plans, but rather are looking “for 'market validation,' hard evidence that the entrepreneur has actually sold his product or at least lined up enthusiastic potential customers.” And they don't want a 50-page presentation; they want a couple powerpoint slides or a short conversation.

So does this mean MBA students all over the world can ignore business plan competitions, stop wasting time on business plan class assignments, and refocus their energies on developing and implementing go-to-market strategies for new businesses? (I hope so.)

Derrick Bolton Interview

There is a new Derrick Bolton (Stanford GSB Admissions Director) interview published in Business Week this month. Interesting new info (for me):

1. Applications being way up is a myth.
2. 21% of the class of '08 accepted a job abroad up from 14% of the class of 07. (Let's see if this emerging trend continues in '09)
3. The new curriculum has twice as many international course offerings.
4. The new Phil Knight campus WILL open during the 2010-11 school year! (Recently, it looked like the opening date might be pushed back to fall 2011)
5. Internship search for class of 2010 has been similar to that of prior classes. (No hard numbers offered)
6. Stanford GSB accepts the GRE as an alternative to the GMAT. (Actually I knew that, but I thought it was worth mentioning)

Mildly outlandish statement: "[The Stanford GSB curriculum overhaul has] been among the most exciting developments in management education in probably the last 20 or 30 years." Way to set expectations high, DB! (PS - is "mildly outlandish" an oxymoron?)

Annoying attempt to pull in younger applicants: "As a school, we see a lot of people waiting because they think business schools want them to wait. [They] think they won't be competitive until they have four or five years of work experience. And that's not true."

I am one of those stubborn people who thinks that experienced classmates are a huge asset in business school. One of the things I liked about Wharton is the higher average age and work experience of its matriculating students. The average number of years of work experience at Wharton is six, with just 2% of students having 0-2 years of work experience and 40% having 7+ years of work experience. By contrast, Stanford's median work experience is 4 years; HBS's average is 4 years. (More detailed HBS age distribution info here. Scroll down to the Oct 1, 2008 entry)

Great answer in response to the question, "As Stanford moves ahead, what is the biggest challenge it faces?":

...If you look at students who are applying to medical school or law school, they're applying for the education. There's certainly a credential element there, but when you talk to those students and look at the publications from those schools, they're about the education. Business schools have in the last couple of decades gone astray and really put too much emphasis on the post-school benefits and not enough on what transpires while you're there. I think our industry overall has made a really big mistake of overemphasizing those ancillary benefits. Applicants have interpreted that as being the reason you go to school. That's probably the thing I worry about the most at Stanford. How do I make sure that we're picking people who and want to take this [education] and make themselves better people, managers, and leaders, in support of our society?...

Rising Student Debt

Yikes! The average debt of American college seniors is closing in on $25K. A recent NY Times article focuses on undergraduate debt as a burden on freshly graduated job seekers, but I imagine an identical article could be written about recent business school grads. The double-edged sword, of course, is the rising cost of education (e.g., GSB total budget is up ~5% from last year) coupled with a dearth of lucrative jobs, especially in the financial sector.

I should probably consider removing my DEBT/saving cash "in and out" entry on the left...

Compelling Article: "Why I Blog"

I am working my way through a pile of magazines that has accumulated unread over the past couple months and I picked up an old issue of Atlantic Monthly. Well I guess it's just called The Atlantic now, but I prefer its former title. In its November 2008 issue, Andrew Sullivan, among the first recognized journalists to embrace blogging, discusses the medium in his aptly titled article, Why I Blog.

My favorite parts of the article are when he discusses the immediacy of blogging--the urgency with which bloggers blog--and the reader-writer intimacy that results:

"Even the most careful and self-aware blogger will reveal more about himself than he wants to in a few unguarded sentences and publish them before he has the sense to hit Delete. The wise panic that can paralyze a writer—the fear that he will be exposed, undone, humiliated—is not available to a blogger. You can’t have blogger’s block. You have to express yourself now, while your emotions roil, while your temper flares, while your humor lasts. You can try to hide yourself from real scrutiny, and the exposure it demands, but it’s hard. And that’s what makes blogging as a form stand out: it is rich in personality."

Since starting this blog in February, I have often felt the overwhelming need to post after reading something interesting about the MBA world or hearing something I thought readers might care about. I have also had the desire to share more of myself than I thought was permissible in an anonymous blog. And I do feel strangely connected to you, dear reader, even though we will likely never meet.

Yale's Endowment & Its Famed Manager

In its April issue, Condé Naste Portfolio published a fascinating article about Yale's long-time endowment manager, David Swensen and his propagation of university endowments' move toward alternative investments, including private equity, venture capital, real estate, and commodities, among others. It is staggering that some of Yale's peer institutions shifted as much as 80% of their assets into alternatives.

As we have heard for many months and as this article reiterates, endowments at virtually all institutions, including Yale and those that followed its model, are suffering right now. Total assets are down by 25-30% or more. However, it is important to remember that alternatives as an asset class are not down as much as U.S. equities. So while alternative investments limit an endowment's liquidity, which can be a critical problem for a university, it is not clear that institutions that stayed away from alternatives entirely would have fared better on a returns basis.

"There was truly no place to hide," explains Sandra Ell, Caltech's chief investment officer.

Broughton Bashes Bschool (What Else Is New?)

Wow, check this one out. This scathing piece is by Philip Delves Broughton, the same fellow who wrote Ahead of the Curve, which I reviewed last month. The article is an unmerciful indictment of "The Masters of Business Administration, that swollen class of jargon-spewing, value-destroying financiers and consultants [who] have done more than any other group of people to create the economic misery we find ourselves in."

The article is harsh, sensationalist, and one-sided. It is essentially a list of disgraced HBS alumni (e.g., Skilling, O'Neal) with very little substantive discussion and zero mention of anything positive to come out of business schools. He never touches on the criminally-negligent regulatory environment that allowed such rampant behavior to persist, except to say that it was propagated by HBS grads Cox, Paulson, and George W. Bush. Nor does he discuss the issue of causation vs. correlation when finger-pointing at the MBA degree and the HBS institution rather than at the individual.

I don't think that American business education is blameless, but I do think Broughton could have done better in his "analysis." The article is a sharp departure from the nuanced view he presented in his book and is a puff piece at best. To his credit, Broughton did provide a humorous bunch of alternative meanings for MBA (Master of Business Administration):
- Mediocre But Arrogant
- Mighty Big Attitude
- Me Before Anyone
- Management By Accident
- Masters of the Business Apocalypse, his article's namesake

Sunday New York Times Reading

Two good articles from the Sunday New York Times this week. Take a look:

1. Is It Time to Retrain Business Schools? discusses shortcomings of the current American business school education, namely that it lacks emphasis on risk management and on relevance to today's world.

2. The Secrets of Talent Scouts discusses the parallels across VC, headhunting, and the music industry as "scouts" search for winners in unusual places. Key takeaway: "take chances on passionate people early in their work lives, focus on what can go right, offer rewards no one else can match and harness the lessons of your own career."

IN: Cover Notes; OUT: Cover Letters

As a fairly recent college graduate with an "informal mind-set," I feel the need to break it to the New York Times' Career Couch -- cover letters are indeed on their way out of the door, at least in the traditional sense. (Random aside, wouldn't "career coach" be a better title for the regular column?)

The recent article makes several good points, namely that it is still important for a job applicant to introduce himself with some non-résumé text, that it is vital to keep the language concise, and that following up with a hard copy may yield more interviews. (I find the last point a little hard to believe given how dismissive my peers, older colleagues and I are of paper mail, but I will give it a try when the time comes.)

However, I have to take issue with the necessity of formal cover letters, especially in this challenging job landscape. Let's say you get the 200 résumés for a job opening that this article references. How in the world are you going to sift through all that drivel (e.g., "my skills are well-suited to blah blah blah," "I will apply my enthusiasm for yada yada")? Short answer: you won't.

Wouldn't one or two paragraphs in the body of the email be enough of an introduction? I think so. And let's not dismiss the fact that we laid-back Echo Boomers are not merely the lowest on the totem pole of job applicants; we are the upcoming generation of recruiters. Most of the head hunters I have met are under 35-years-old.

So here are PAFAW's rules for writing a cover note -- not letter -- note:

1. Keep it short: 2-3 paragraphs max. (two is the sweet spot)

2. Answer three questions:
- who are you?
- why are you interested in the job?
- what skills/qualifications do you have that will help the organization reach its goals? (okay, so I kind of stole the last one from the article)

3. Do NOT rewrite parts of your résumé in paragraph form.

4. Do NOT be repetitive. If you have already said it somewhere else in the note, move on.

5. Get a second and maybe a third pair of eyes on the document before hitting the send button.

PS: if you look to the left, you will find a new sidebar with PAFAW's running list of "ins" and "outs" as they relate to my posts. Enjoy!

MBA Job Market

An employment report of Stanford's class of 2008 showed up on the GSB admissions blog last week. I hope that my two years at the GSB will help me figure out how to get a $200K signing bonus (the upper end of the signing bonus range). Kidding. Well, sort of. But seriously Stanford, give us some real news -- what is going on with the class of 2009? What about the class of 2010 summer internship search?

Just two days later, the HBS Director of Admissions blogged that 77% of those seeking employment in the Class of 2009 have received offers. That number sounds high at first glance but let's note a couple things. The first is that we have nothing against which to compare this percentage. What was the figure in February 2008? Feb 2007? The Feb 2006 number had to be amazing given how frothy the market was back then. The second thing to note is that she clearly says they have received offers, not that these students have accepted offers. There is a big difference between getting a couple offers that you are loathe to take and having a job offer that you are thrilled to accept.

Meanwhile, the MIT Sloan career development office told Business Week in its grimly titled February 2 article MBA Job Outlook Dims that about 50% of the class of 2009 have job offers, flat from last year. Over at UCLA Anderson, about 33% of the class of 2009 have a job lined up, "down significantly from January 2008." UVA Darden students are in better shape, 67% of whom have job offers -- still down from 81% this time last year.

Business schools admissions officers are clearly trying to reassure applicants that there will be internships and jobs for them in the future and that leaving their current jobs is not foolish. I personally don't have the option to stick around with my current employer, so they need not try to convince me. I'm convinced!

PS: If you're interested in Stanford employment reports going back to 2003, click here. I'm too lazy to dig through those but let me know if you learn anything interesting.