Saturday, March 29, 2008

Something I'll be thinking about a lot over the next year

Do I want to go to business school? (HBS turns 100 in April and this article made me think of it) I never thought I would want to. I always thought it was a degree where you didn't learn a ton, and what you did learn you could learn elsewhere. But now my consulting experience is making me at least consider it.

I've known since I was very little that I would want to go to grad school. When I was younger, I thought I might want to be a doctor. But starting in high school and then accelerating in college, I became more and more interested in economics. A PhD in economics started sounding appealing, and I even took grad courses in econ to test it out. I love the logical approach that economics takes, and a PhD lets you practice that at the highest level. But I needed to experience the real world approach first. Hence my current consulting gig.

Now I am seeing the differences in the academic vs. real-world approach. The academic approach focuses on getting the 100% answer and proving it beyond a doubt. When I worked on my research paper, this even became quite annoying, as I found the mathematical rigor required to be excessive.

Now turn to consulting, where the opposite is the case. You want to get the 80% answer as soon as possible (in 20% of the time, as consultants famously say), and then you want to make the most of the insights.

It was simply liberating early on my first study here. One event opened my eyes. We noticed an opportunity in the way trains were built. As you build a train, you link cars full of cargo and then you put locomotives at the front. The number and strength of the locomotives you need depends on the total tonnage, and there are specific thresholds that, once you pass, will necessitate an extra locomotive. 10,000 tons is one such threshold. So a train that is 10,000 tons will require 3 locomotives, but a train that is 10,100 will require 4. Locomotives are very expensive (think $2 million each). So if you're about to go over a threshold, you should do 1 of 2 things - either not pass that threshold, or pass it so far you butt up against the next threshold to maximize the use of the locomotive. But the railroad wasn't paying enough attention to the tonnages, which meant it wasn't getting the most of its locomotives.

So in an academic setting, this would require mounds of data, extensive documentation, extensive statistics, and then endless discussion. Instead, I gathered basic data for 300 trains and made a slide. The whole process took a few hours. We put that in front of the executives, and the next week the railroad changed what it was doing.

The bias towards action here is palpable and refreshing. It has me thinking if I would really enjoy being an academic. Academics spend a ton of energy on getting the conclusion, but then rely on others to make the most of it. On the other hand, I really enjoy making the most of insights.

I still don't think you particularly learn a ton at B School. The primary purpose as I understand it is to network and meet recruiters, as well as be a signal. But there are other benefits. For people who just spent 2 or 3 years in intense consulting gigs, it's a break from the hectic life. They pack it full of vacations and enjoy themselves. You can pursue side passions, read more, develop new interests. And two years really isn't that long, as where 5 certainly is.....

So we'll see. Who knows, I might end up at B School at some point, all of my criticisms be damned.

Wednesday, March 26, 2008

I believe this

Having gotten a mortgage from New Century and seen how they did business, I can certainly believe this

The scathing 580-page report documents how New Century lowered its reserves for loans that investors were forcing it to buy back even as such repurchases were surging. Had it not changed its accounting, the company would have reported a loss rather a profit in the second half of 2006.

The profit was important because it allowed executives at the company to earn bonuses and allay concerns that the company was healthy when in fact its business was coming apart, the report contends.

Monday, March 24, 2008

taxes- the power of experience

Time to file my taxes last year (first time doing it myself) - 30 hours
Time to file my taxes this year (despite my situation this year being more complex) - 3 hours

You really should just buy one of the software packages (I got TaxCut because it was cheaper) and do it's an educational experience that will help you make better financial decisions in the future.

A few notes:

When you hear a politician talking about taxes, you usually hear federal rates, but state rates matter a lot too. Last year is the last year I will pay a state income tax until I leave Texas (Arizona was taking around 5%)!

Capital gains tip: if your income is below 30k, you pay 5% instead of 15% on capital gains. So if you have stocks with gains and you're about to get a job that will take you above that amount, you might take some gains now and pay the 5% now rather than 15% later.

The structure of the tax code is relatively straightforward, but the number of exceptions and the paperwork involved is mind-boggling

The tax code is heavily skewed to support involvement in real estate

Spending $60 or whatever on the software is so worth it

I still went in to an accountant for a half hour on Saturday to ask questions. $70 may seem like a lot for such a quick amount of time, but it's a wise investment if you can't get an answer off the internet or from the software. The accountant said more and more he doesn't actually fill out forms but just examines the output from the software of his clients.....

Sunday, March 23, 2008

Why we should eliminate our mistakes before we shoot for the stars


But that kind of truth can be uncomfortable to face. It's a lot easier to sell financial pornography, pleasant fantasies about how you yes you can be the next superstar, than to sell the truth: that you yes you are screwing up, big time, and need to change your ways.


Four-fifths of drivers think they're in the top third. Half of all sociologists expect to someday be among the top ten leaders in the field. Not a single US state will admit to test scores are below the national average.

Cool random sight

Sent via BlackBerry from T-Mobile

Sunday, March 16, 2008


Sent via BlackBerry from T-Mobile

Why Railroads are Hot

In addition to domestic growth, booming imports from Asia and from NAFTA partners Canada and Mexico are contributing, and so is foreign demand for U.S. coal and grain.

The ethanol industry has also created a new source of business. "Both the corn used to make ethanol and the finished product are most likely to be shipped by rail," says Kremar.

Railroads are far more energy-efficient than their competition. Locomotives today get 80% more mileage from a gallon of diesel than they did in 1980. As a result, trains consume far less fuel than trucks do to move the same amount of freight.

That not only saves on costs, it reduces emissions of greenhouse gases. In fact, the Environmental Protection Agency calculates that for distances of more than 1,000 miles, using trains rather than trucks alone reduces fuel consumption and greenhouse gas emissions by 65%.

On a personal note, I was very excited to start working on a railroad client. I love transportation, and this is an area of transportation that is going to be doing better and better. And you get the help the environment to boot (and therein lies a potential major catalyst for growth).

Monday, March 10, 2008

Favela tours in the NYT

By most accounts, slum tourism began in Brazil 16 years ago, when a young man named Marcelo Armstrong took a few tourists into Rocinha, Rio de Janeiro’s largest favela, or shantytown. His company, Favela Tour, grew and spawned half a dozen imitators. Today, on any given day in Rio, dozens of tourists hop in minivans, then motorcycles and venture into places even Brazil’s police dare not tread. Organizers insist the tours are safe, though they routinely check security conditions. Luiz Fantozzi, founder of the Rio-based Be a Local Tours, says that about once a year he cancels a tour for security reasons.

Saturday, March 08, 2008

The absurdity of where I work

On Wednesday, we had a presentation to a high-level exec of the client I'm working for in Kansas City. He really liked our ideas, and we had a lively discussion. He was talking about how one particular airline had tackled a similar problem to what we were solving.

Our team smiled and stared at one of our guys in the room, because he was part of the team that had worked for that airline. He just smiled (we take confidentiality seriously), but let's just say we had the right experience to tackle the issue.

Thursday, March 06, 2008

Signs you are working in a railyard

The restaurant across the street has a bigger smoking section than non.
Sent via BlackBerry from T-Mobile

Monday, March 03, 2008

This gives an idea of what I'm studying right now

Winding trains more than a mile long, expanding traffic, coal lines, hardened railroad men, work rules, nocturnal culture. Sounds like what I've been studying all day every day here in Kansas City......

Now, she says, she likes Bill. When she steps out a back door for a cigarette, she sees nothing but beautiful nothingness.

The hotel in Bill — some call it the Bill Ritz-Carlton — is open to everyone, but is especially designed to accommodate these railroaders. For example, in keeping with a contractual agreement between the railroad company and the unions, it must have a break room, an exercise room and, very importantly, a card table.

Because railroading is hardly a 9-to-5 profession, each room has window shades designed to thwart any peek of daylight and thick walls to snuff out sounds like vacuuming. The hotel also has a "guest finder" system that uses heat sensors to signal if someone is in a room, possibly resting, almost certainly uninterested in a cheery call of "Housekeeping!"