Expensive Apples

Yesterday’s microeconomics class about monopolies was quite fascinating, especially the idea of profit maximisation in a monopoly as at first it is counter-intuitive.

Here’s how I see the profit maximisation theory applying to a well-known company: Apple. Let me know if I’m wildly off the mark and I’ll go back to my text-books.

Apple has a kind of monopoly in the high-end personal computing market. I have read that it has a 90% share of the $1000+ market. Most of the personal computing market has had it’s profits squeezed massively, whereas Apple, I believe, is one of the most profitable companies out there, and is especially profitable compared to other computer manufacturers.

I’ve often read Apple critics say that if Apple were to just lower its prices it would take a bigger share of the personal computing market and would get more revenues as a result. However, I would say that Steve Jobs, as well as being a great product guy and a bit of a psycho, is also a great economist. Perhaps he has got Apple computer sales ticking along at their profit maximisation point and he knows that if they were to sell more Apple computers they would actually reduce their profits.

I asked our Prof about this and he said “I don’t know”, which a bit less than satisfying. I did ask how they can make more profits with a given product line if they’re at the profit maximisation point, and the answer was “they can’t”. So the only way to grow profits is to move in to new product lines.

I was looking forward to this lecture as I’m familiar with another monopoly: the market for MBA loans in the UK (rant warning). There is only NatWest serving the market and one of the things that suffers in a monopoly is customer service. Interestingly, students from Insead have set up their own MBA financing marketplace, Prodigy, where alumni actually invest in new MBA students.

Lastly, I point you in the direction of Mungonomics.

Who gets depressed? The rich. Everyone else is too busy.

Poets & Quants

Dome, or no dome? That is the question.

1.5 weeks in to the first term of the MBA here at SBS and one thing is clear – the playing field is not level. A lot of people refer to students in the MBA class as either “poets” or “quants”. Grossly speaking, the quants have had experience of numbers – accountants, investment bankers, economists, whilst the poets have more experience of… well, the creative side of the world.

I’m pretty sure I’m a poet. My PhD was in Genetics, but I actually consider it to be more like Cell Biology. I did the majority of my research on a massive deconvolution microscope making pretty pictures and movies of fluorescent yeast cells. In that respect I felt more like an artist at times. My main drive was to get the perfect picture or to make the ultimate 3D movie of one of my wee yeasties segregating its chromosomes.

In class I’m surrounded by people that have already done much of the work we’re going over. Some of my classmates have even previously taught the stuff I’m trying desperately to learn! That’s a pretty useful advantage and us poets have got a lot of catching up to do. I’m grateful that in my consulting work I’ve done some NPV calculations so the concept of a discount rate is not completely alien to me.

So here is this poet’s potted analysis of the first 1.5 weeks of lectures:

• Microeconomics: apparently simple concepts can be turned in to equations and graphs and made very complicated indeed.
• Strategy: Don’t try to build your fort at the top of a mountain. Or maybe just don’t try to build a fort at all. Or just sell electrical white goods to the middle of the market. No actually don’t do that last one.
• Financial Reporting: Nobody knows if a company is making money or not. Nobody. Not me, not you, not the executives, not the accountants. Profit is an abstract concept – I have cashflow therefore I exist. Debit sometimes seems to mean credit and vice versa.
• Marketing: Ignore Harvard MBAs.
• Finance: Lulled in to a false sense of security because I once did an NPV. This is gonna get tough.
• Decision science: Statistics taught by a Shakespearean actor will be the best lecture you have ever had in your life.

Jack of all trades, master of…. ummm

 

The Passage of Time by ToniVC

 

One of the frustrating things about doing the MBA at Oxford is that you are only here for one year – and it is a packed year at that! I went to Fresher’s Fair on Friday and it was quite an experience – one which I suspect is fairly unique to Oxford.

There were rooms upon rooms packed with societies. Where else could you find societies ranging from a Tolkein Society to a Gregorian Chanting Society? You wander round there feeling like you want to try a bit of everything – this is my one chance to be a member of the Oxford [insert random activity] Society/Club and I don’t want to miss it!

I think I picked up leaflets, or put my name on mailing lists for: the Tolkein Society (mainly so I could say that I had), the Scottish Dance Society (it was the only Scottish thing there), the Canoe club,  Pistol Club, Mountaineering Club (I wouldn’t mind getting back in to rock climbing), German society, Scandinavian society, Oxford Entrepreneurs, the Boxing club and probably some others I’ve forgotten.

The reality is I’ll be lucky if I have the time to participate in one or two of these. I think I’ll try boxing for the workout (and maybe some punching if I get frustrated), and I’ll try to get as involved with Oxford Entrepreneurs as possible.

Similarly in the business school we have the choice of joining student run Oxford Business Network (OBN) groups which are focussed on things like Finance, Management Consulting and Entrepreneurship. I want to focus on Entrepreneurship, but then I look at the others and think, “well I could be interested in a career there – I don’t want to miss out so I’d better join up.“ Before I know it I’ll be a member of every OBN there is going. They all look really interesting!

So classes start tomorrow and I am starting to have a mini-panic attack at the thought. I am still a bit disorganised (like maybe I should buy some books) and still have loads to do before the first lecture. So what am I doing? I’m here writing a blog post!

Procrastination is not the problem, it’s the solution! So procrastinate now – don’t put it off! (Ellen DeGeneres – great American philosopher)

Here’s an article by Paul Graham about procrastination. I haven’t read it yet (got Tweeting to do) but I’m gonna go ahead and assume it’s a good read.

This year I really want to get on top on my time-management skills. There will be so much to do and so little time to do it! Alanna was saying pretty much the same the other day on her FT blog.

Side note: I love Google Calendar and I love syncing my Google Calendar to my iPhone calendar. I think I am going to be living by them this year. Life would be so much easier if all lecture timetables, and society term cards etc., were always available as a downloadable calendar or shareable Google Calendar. That is good, efficient use of technology. I hope one day this becomes the norm. At the moment I have various timetables that are either bits of paper or just in pdf files.

Why Oxford?

Pic by Frosts Commercial Landscaping

We’ve had a series of pre-induction events at Saïd Business School this week, which has mostly been talks by a number of faculty staff*. The course director, Stephan Chambers, gave a very inspirational speech about the MBA programme and what we should aspire to achieve with our degrees. There was also a lot more talk about entrepreneurship, the SBS VC Fund, and the Venture Capital Investment Fund.

It was once they started talking about entrepreneurship and VC that I really started jumping around in my seat, excited and raring to get started. Yesterday’s talks really confirmed to me that I had made the right choice in going to Oxford for my MBA, but one statement that Stephan Chambers made really summed it up for me:

“Saïd Business School is like a start-up with a blue-chip investor [in Oxford University]”

He’s right – it’s really got that start-up vibe. I mean the sort of vibe that must have been around companies like Amgen and Genentech in the 80s or Google in the early 00s. We’re on to a good thing and the only way is up! As Stephan also said, we know we are currently leveraging Oxford’s brand name, but in the not too distant future Oxford will be leveraging Saïd Business School’s name.

I thought I’d take the opportunity to recycle a post I did on the Google group a few months ago explaining why I chose Oxford:

“Oxford was my clear 1st choice for a number of reasons.

My focus is on Entrepreneurship and Oxford appears to be very strong
in that area. I was impressed by the quality of the speakers at the
“Silicon Valley come to Oxford” events and the SBS Venture fund
competition sounds good – I want to raise VC money by the end of the
course! 😉 Insead also claims to be strong in entrepreneurship (as my
Insead alumni friend would often remind me) but the fact is with
Insead you are either out in Fontainebleu or out in Singapore – that
can’t compare to being 1h away from London, which I think is still the
best city in which to raise money in Europe. Also I think in the other
fields I am interested in the Oxford name will mean more than Insead.

Also I already live in Oxford, so there is a practical advantage to
going here, not least it works out much cheaper (I couldn’t actually have
afforded Insead). Moreover, having lived in Oxford for 5 years I do
feel a kind of connection to the University already. In many ways I am
envious of the students that are at the University, since I got here
I’ve dreamed of entering that world. Oxford really is such a special
place – you’ll feel it even when you’ve just been here briefly but
once you’ve been here for a while it really becomes part of you (I
lived in London for 4 years before that and I much prefer Oxford).”

So 2.5 months after writing that, and having actually started at the school, I think what I wrote still holds true. I only actually applied to Oxford. I knew it was my first choice and somehow I had total conviction I would get in. I’m glad I was right!

*special kudos has to go to the Head of SBS Facilities for turning a 30min talk about fire drills and first aid, in to one of the most entertaining talks of the week. The guy was a fantastic speaker. I actually spoke to him afterwards to tell him that a number of people thought his talk was great.