Below are some of my biggest takeaways from my classes last week:
This is a really challenging class that poses way more questions than it answers. In TAing the class, I'm lucky to hear the varying opinions of my classmates and consider my own viewpoint on how to act in various difficult situations.
- Integrity between personal and company values is key.
- Leadership and the Quest for Integrity argues that having prejudices or predispositions to handling various scenarios in specific, predefined ways can help solve many of the most challenging dilemmas.
- Three styles of leadership: political, directive, value-driven
- Ethics, optimization, and public policy (strive to find the intersection)
- Matrix to consider: 3 viewpoints (utilitarian, contractarian, pluralist) and 3 targets (individual, company, society)
This class basically overturns everything taught in traditional finance classes and explains how the "real world" works in terms of actual trading behavior and stock performance results. We're going through the main academic articles in the field over the past 20 years and combining finance with psychology to better understand how people make (and should make) investment decisions.
- CAPM and APT are blatantly wrong (they aren't good theories for explaining or predicting reality).
- Market does not have any level/strength of efficiency.
- Psychology of investors and company fundamentals much better determining factors of performance
- Size and book-to-market ratios much better at explaining why returns vary from stock to stock than beta
- Characteristics of stocks (like fundamental ratios) have much more power to explain returns than risk factors (like beta).
- Value and contrarian investing work.
This class is a very interesting blend between business and law and covers both the theoretical and real-world aspects of "making it rain [not in the club]." We work in teams of 2 business students and 2 law students to dissect unedited deal documents for a different deal each week, varying from financing, to acquisitions, to partnerships in a variety of different industries. I absolutely love being able to see real-world documents and understand how they evolved and see how the negotiations progressed. It's also really neat to hear from the principals of the transactions in each class what it was like from their perspective and what lessons they learned.
- Key elements in every deal: risk, reward, control, duration, trust
- View of the firm as a nexus of contracts
- Deals/acquisitions often purely to thwart competitor moves (one of us will buy, so it should be me)
- Structure returns based on performance hurdles.
- Ethics of pulling out of deals (it's interesting how this class ties in with my ethics class)
- Ethics of full disclosure
- Establish trust first. Trust is often the most important factor in determining who does deals with whom.
- Desperation hurts. Should your vacation rush your deal close?
- Keep backup deals in place through closing.
- Don't shortcut the documents (pay your lawyer a little now or a lot later).
- Time and lifestyle can't be recovered, so those are often more important than negotiating the best possible deal.