Buenos Aires = Ice Cream + Steak = Awesome

(Ice Cream from Heladeria Cadore)

Sandwiched between the Amazon Rainforest in Peru, and backpacking in the Patagonias, I found a few days to rest in Buenos Aires, Argentina.

They say the quickest way to a man’s heart is through his stomach, and because great beef and delicious ice cream are everywhere, Buenos Aires has already made a special impression on my heart (in the form of a heart attack).

Walking around the city, seeing it’s history, eating the food, and hanging out with my awesome Argentinian Sloan friends, it was a fun, relaxing, and a really enjoyable few days.

I definitely want to come back and spend more time here – eat more beef, eat more ice cream, go to a Boca Junior match, hang out in Uruguay for a few days…so much to do.

Out of the Jungle

After spending 10 days in the jungle with (in order of importance) no internet, electricity, hot water, and 100s of mosquito bites…we’re still alive.

Just got into Cusco getting ready to tackle Machu Pichu tomorrow at the crack of dawn.

Details of the jungle to come later =).

Beginning of an Adventure: 50 Days in South America

This January I will be doing G-Lab in Brazil. On top of that I have NO finals. If I gather all the free time that I have, it comes out to 50 days. When else will I have free 50 days during winter?

And so I decided it would be fun to go on an adventure to South America.

My tentative itinerary is as follow:

  1. Lima, Peru
  2. Amazon Rainforest
  3. Buenos Aires, Argentina
  4. Patagonias
  5. Santiago, Chile
  6. Brazil (for G-Lab)

Having finished classes for this semester this past Thursday, I have already started traveling. Took a bus from Boston to NYC yesterday, and this morning I have already flown from NYC to Bogota, Columbia. Where, currently, I am awaiting for a transfer to Lima, Peru.

Many adventures await…much free thinking time awaits as well…It’ll be fun to see what transpires.

Social Commerce 2-Sided Networks: The Effect on Local Businesses

Lately, there’s been so much news on social commerce platforms. From Google trying to buy Groupon, to Amazon purchasing a stake in LivingSocial, these social commerce sites have taken over the internet.

Though, I’m not complaining…as a consumer I learn about new things in town, get great deals from food and try new things like skydiving. This semester (Fall 2010) in our class Economics of Information, taught by Prof. Erik Brynjolfsson, a team of us (Esther Tan, Jason Costa, Mansoo Jimmy Park, Joy Koh, and myself) examined the effect on the local businesses in this 2-sided network.

[NOTE: this is also posted on the class website]

The landscape for collective buying platforms is growing tremendously. In this two-sided network, the service providers receive revenue on every deal, and the consumers receive deals on businesses, services, and restaurants in their local area, often 50% or greater.

Then what about small businesses? 

In our study, when local businesses try to advertise to their small community, they often go through local newspapers, spending thousands of dollars without clear metrics on their advertising returns. In contrast, these collective buying platforms offer numerous benefits to small businesses:

  • 90% new customers
  • Opportunity to up-sell
  • 20% return rate on customers
  • Up to 40% un-unused rate on deals
  • Customer relationship management (CRM) opportunities

For businesses with small marginal costs [fitness classes or memberships], even if a deal is 50% off, every deal is almost pure profit.  Even for businesses with high marginal costs [services or restaurants], this still creates exposure, as long as they do price to take a loss any each deal.

One of the biggest benefits to small businesses is cash flow. Once the deal is finished on the platform’s site, they immediately receive the cash. Essentially, they’re borrowing the cash until the buyers use the deal, which many do not use at all. Further, it is not uncommon for many of these small businesses to sell number of deals equal to their units sales of the previous year!

In conclusion, everyone wins in this 2-sided network. The platform and their business model, the consumers with their deals, and the small businesses with their “better than free” advertising, exposure, and clear customer segmentation. The only casualty we see in this situation, a familiar trend in this internet age, the local newspapers.

2nd Year Reflections: Financial Innovations != Student Financing

In our economy there’s been so many financial innovations. Some for the better, some for the worse. But one area where I feel there could be more creative solutions is financing education.

On this topic, taking a SIP (Sloan Innovation Period) class from one of my favorite professors (Professor Paul Asquith), he gave us a quick introduction on corporate structured securities and went over dozens and dozens of unique examples. In the aftermath, it made me think about my MBA and how I’m currently financing it. Right now I’m pretty much taking a loan from the US Government and other private banks, getting the capital upfront, then paying them back with interest after I graduate. Essentially it’s similar to me issuing a bond, and then paying it back over a number of years. Shouldn’t there more options to finance education?

BOND STRUCTURE

Another alternative is to change the way the current bond-like structure is done. Instead of banks issuing loans based on co-signer, credit score, etc, then selling their student loans so that other banks can group them together to sell securities based on that, why not make more specific securities. An an example, group together MBA student loans, where one might say has a high guarantee of re-payment. Or, you could group together different majors, different schools, and try to differentiate based on that.

Recently Business Week had an article that combined a variety of data to examine the ROI of a degree, seperated by undergraduate university. What if, based on that (and other data), a student would be able to get a better loans rates by proving that they have a higher chance repayment rate. Further, this would an excellent way for Alumni to stay connected. More than just donators, they could be INVESTORs of their alma mater.

This particular idea has recently been explored by INSEAD. Individual investors would be financing the educations of a specific graduating class of INSEAD MBAs. This topic has been explored by my classmates over at “The MBA Show.”

This to me is a very interesting idea. I would think alumni in general would be very supportive of following the students were come after them, and makes the idea of financing education much more community based.

STOCK STRUCTURE

Why not try to mimic a stock structure instead of a bond structure? Why not do something interesting like selling a percentage of your future earnings for a set number of years?

One might argue that this incentives the student to not make money, instead doing Peace Corp or Teach for America or going off and being a teacher. Then EVEN more I think this financing structure should be done. Instead of banks, the government could do the financing to encourage this behavior.

Further, the structure (payout, percentages, years, etc…) could be different depending on program; MBA, Architecture, Engineering, Graduate or Undergraduate.

As an undergraduate, going into college at 18 it is a very unlikely that the student knows that they’re doing in the next 4 years. This might be an excellent opportunity to take a risk for both parties.

I know for myself, what % and years I would consider reasonable at 18 going into college would be very different than the what I felt at the end of college, or even at the beginning of business school.

Thinking about all this…it brings me back and helps me better answer a more fundamental question: What is the value of education?

MBA MIT Sloan First Year Recap – Treks!

Business school is funny. Though you have no income, there are so many opportunities to travel. Hence another reason Bschool becomes a very expensive two years of your life.

Looking back at my first year, here are some of my favorite treks/trips.

1. Iceland – Toured the country, visited their central bank, took a dip in Blue Lagoon, went to a geothermal plant, and ate some famous Iceland hot dogs. Awesome.

2. NYC Sports Trek – I was one of the directors for this trek and we visited NASCAR, NHL, NBA, and NFL, learning about the sports industry and how to break into it.

3. NYC Finance Day – Spent the entire day visiting investment banks in the NYC area. A great opportunity to hear from MIT and Sloan alumni about working in this ever changing industry.

4. MediaTech Trek – Spent a week in the Bay Area visiting Tech companies from major players (Google, Apple, Yahoo, Cisco) to growing companies (LinkedIn, Zynga, VMWare) to startups (Dropbox).

5. Tuck Winter Carnival – A gathering of Bschools from all over the nation. This was especially fun since MIT Sloan brought home the hot dog eating trophy for the 2nd year in a row!

6. Luxury Study Tour – A week in Europe learning about the luxury good industry. Learned about how a brand, by itself, can have so much influence.

 

I will be posting highlights on individual ones in the future.

Summer Internship as a Real Option -> Knockout Option

Trying to combine some neat thoughts from my summer and some  lessons from my MBA…I was thinking how to think about the summer internship in terms of real options.

In one sense, it’s an option from the company, they “rent” you for a summer, with an option to retain you (if they like you) after you graduate.

Another way, it’s an option for the summer intern as well. The intern gets to “test” out the company, and if the intern likes it then they can choose to return upon graduation.

The options on both sides are contingent assuming the other party would welcome the option.

Hence I would model the scenario with the below graph as a Knockout Option:

The X-axis models the talent level of the intern.

The Y-axis is how much utility the company can get out of the intern.

Zone I: Represents the area, where the intern’s skillset does not match with the company’s needs. Often, the intern would like to be at the company, while the company would rather have someone else.

At point A, there is a transition, where the intern meets the company’s minimum utility needs and can now be a good asset to the firm.

Zone II: Represents the area where both the intern’s skillset matches the company’s needs. This is often a happy spot for both the intern and the company.

At point B, there is another transition. The intern is quite good, and the company can get a lot of utility out of the intern, but the intern may be “too good” for this company. Which bring us to point C, where the intern would rather pursue another option, and thus provide zero value to this current company.

Zone III: Represents the area where the company would love to exercise the option on the intern, as they would be very useful to the company, but where the intern may not exercise his/her option, as they feel they can learn/gain more, get more satisfaction/challenge at a different company/option.

Of course where point A, B, and C is and how the curves looks is different for every person and every company. But the main ideas are the same.

And really, more than just the internship, this may broadly describe current jobs/positions. As one grows in their career/position, they climb up the curve in Area II, eventually reaching a point (B) where they need to go to another position or company…even though it’s more useful to the firm for that person to continue there.

I wonder where I see myself right now?……

Blogging Ideas…

So as I continue to try to water this plant (this blog), some ideas that I hope to implement.

1) Finish up my first year MBA highlights (hopefully before I finish my second year!)

2) Put up some posts on my summer (2010)

3) Share some of my favorite adventures pulled from my pre-MBA life

4) Share highlights (hopefully recent) from my 2nd year MBA experience

Again, we’ll see how far this goes…

An Engineer MBA Exploring Sports, Technology, and Life