101 Things I Learned in Business School
by Michael W. Preis and Matthew Frederick
The study of business spans “such diverse disciplines as accounting, communications, economics, finance, leadership, management, marketing, operations… and strategy.” This book provides a thumbnail overview of variety of such topics. Here’s a sample of ten items covered in the book.
Cash Flow vs. Profit. “Profitable, fast growing companies can be chronically short of cash. A business typically makes a sale before payment is received from the buyer, while the costs related to that sale, such as materials, labor, commissions, and overhead are borne up front. Consequently, a business that is profitable may be short of cash until payment is received. An especially fast growing company with rapidly increasing sales might be chronically short of cash. Procuring and maintaining adequate capital is crucial for businesses… Undercapitalization is among the most common causes of business failure. It can bring down an otherwise healthy organization.”
Risk Homeostasis. “Risk homeostasis theory says that people have an innate sense of the level of risk they consider acceptable; when a given system is made safer, they behave more recklessly and at least partially nullify the safety gains. A study at the University of Bath found that… taxicab drivers in Munich driving vehicles with anti-lock brakes took corners faster and left shorter reaction zones than drivers of cabs with conventional brakes; the two groups ultimately had the same crash rate.”
Moral Hazard. “When organizations and individuals are not required to bear the negative consequences of their failures, a moral hazard exists. A lender insured by the government against loan default, for example, may make very risky, high interest loans to uncreditworthy customers because the lender will do no worse than break even, and at best will realize a very high rate of return.”
Due Diligence. “A ‘successful’ entry into a bad business venture may be far worse than missing out entirely on a good business venture… The opportunity in front of you may seem once-in-a-lifetime, but business opportunities are numerous. It is usually better to wait for or seek another opportunity than to rush into the present opportunity without performing due diligence.”
Redundancy in Contracts. “A well-written contract defines or explains each term or condition only once… Repeating contract language in an effort to impart greater emphasis is dangerous, as differences in context can lead to confusion in meaning and an unfavorable interpretation in a court of law. Further, because negotiations invariably require editing of contract language, a redundantly drafted contract will require changes in multiple locations—leading to the possibility that one location will be missed and an inconsistent document will result.”
The book provides a good selection of concepts for prospective business students and others seeking a cursory survey of business topics. The title not only refers to the number of items presented, but is also a word play (intentional or not) on the introductory course number Business 101.
Preis, Michael W., and Matthew Frederick. 101 Things I Learned in Business School. New York: Grand Central Publishing, 2010. Buy from Amazon.com
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The Key Point 