Fall Semester 2012 School Stuff

The reason I am making a school blog entry doesn’t make much sense in my own mind, so whoever reads this…don’t think I am too strange. I need repetition to sink principles into my medulla oblongata (see I already have forgotten from anatomy class about where the brain stores learning). If you happen to have trudged upon this post understand its purpose is to help an A-minus student stay afloat in the competitive college world becuase he doesn't have a great memory. And spoiler alert: it could be/is boring. I will cover some random principles I learned in my classes and hopefully you find something interesting. This is not a comprehensive list of what I learned but a little insight into BYU and the Marriott School.

Investments

            We studied the efficient frontier which is a plot of expected returns versus standard deviations for a portfolio of assets. Because there are varying levels of correlation between assets actual returns, diversification and optimization can be achieved by reaching different weights in those assets. The efficient frontier graph is a line which represents the highest portfolio returns possible at each unit of standard deviation or risk. With a given risk free rate (which are represented by US Treasury Bills) one can create a capital allocation line from the risk-free’s return to the tangency of optimal portfolio on the efficient frontier. Investors would then choose according to their risk preferences on where they want to allocate their resources between the portfolio and risk free notes.

            The sharpe ratio is a useful tool in valuing an asset. For comparable assets you can use this ratio which is derived from the assets return in excess of the risk free, divided by the realized standard deviation of those returns. The sharpe ratio is essentially the slope of your historical returns and risk. The higher the sharpe ratio the higher return you can expect for one unit of risk.

            Stock indices are weighted in different ways. The S&P 500 is a value weighted index which means the size and influence of the individual companies within it is weighted into the change of index level. The more market cap a company has, the more its portion is felt in the index.  The Dow Jones is a price weighted index so this means the size of firms doesn’t affect the index as much as the price of a share does.

            You can find the beta of a security by regressing the returns of the security against the returns of the market in the same time period. Betas over one indicate that a security will fluctuate cyclically with the market. When the market is good then the security with high beta will have great returns, if the market dives then the security will have compoundingly worse returns. Low beta securities tend to be the “needs” type products which will are stable but not going to boost in times of prosperity.

            Efficient market theory has several components but essentially revolves around the debate of whether the price of securities reflects all information. Weak form theory suggests that a securities price includes only information known to the public. Strong form believes that both insider information and public information is already built into the price of a stock. Strong form essentially asserts that there is a random walk of prices according to new information and that if two economists were walking down the street and one spotted a $20 bill on the ground, the other would tell him not to waste his time picking it up because if it was actually worth something (like an undervalued stock), then somebody else would have already picked it up.

            We discussed real and nominal interest rates. Real rates include the effects of inflation and are a reflection of what your true purchasing power is. Nominal for example could be a promised raise in your salary which doesn’t include rising inflation.

            Several factors can go into mutual fund returns. Different mutual funds have different ways of charging the investors. The varying loads include front and back end fees, 12-b 1 fees (marketing and selling fees), and annual expenses. Each of these fee types has its pros and cons. An investor should be sure to discuss with his fund manager what type of fee schedule his asset will have.

Corporate Finance 

            Net present value illustrates the worth of a project or investment. Time value of money theory concludes that a dollar today is worth more than a dollar tomorrow. NPV is a function which can be performed either on a financial calculator or via Excel (the god of computer programs). To get the present value of a number you will need a time horizon, interest rate, and either payments of a future value. This function is useful if you have an obligation to make in the future and want to know how much you need to devote today and what type of interest rate you should work with.

            A discounted cash flow analysis is performed by taking data off of the income statement and balance sheet and figuring the annual cash flow of a project. Then using an appropriate hurdle rate a finance manager will discount those returns back to the present. If the NPV is positive, or the internal rate of return (IRR) is over the required rate of return, then the project should be pursued. A DCF typically includes information about the initial costs or outlay of a project and the subsequent expected cash flows.

            Adjusted present value is a useful tool when including the value of tax shields into your discounted cash flow. A tax shield is created when managers use debt financing. Because interest payments are tax deductible it is a useful way to increase cash flow assuming financial distress is not high. Depreciation also contributes to the tax shield because it is deductible as well.

            Investment risk is divided into two major compartments: firm specific and market risk. Firm specific or idiosyncratic risk is assumed to be diversified away when creating portfolios and doing models but it relates to specific problems which a firm might incur like losing a manager or having a fire in a warehouse. Reward is given for market risk. Market risk affects an entire asset class. Examples would be war or high inflation. Even market risk in theory can be diversified away if you take globalization into account.

            Effective capital structure is what finance managers work for. The balance between utilizing debt, equity, or some kind of hybrid instrument is the challenge. Trade-off theory illustrates firm characteristics which show how a company should be financed: high tangible assets means high debt levels, highly skilled labor calls for lower debt levels, in some industries customers or suppliers care about a company’s debt level, etc..

            One of the most crucial financial principles is that of the weighted average cost of capital. The WACC is used to value projects because it is a representation of the average hurdle rate which investors and creditors require. The cost of equity is higher than the cost of debt and doesn’t have tax benefits. The cost of debt is lower and more available but obviously doesn’t give investors a great return. A company gets a weighted average of its financial backing and this constitutes the WACC. 

Business Communication

            I didn’t get the best grade in this class, possibly evidenced by how hard it has been to read this article. I certainly have lost some of the flare I used to have in writing and I am not writing the best CLOUD paragraphs (coherence, length, organization, unity, development).

            We tailored our resumes and I learned to have a base resume which you alter each time you apply to a different job. Cover letters are also a great way to show interest in a company and get them prepped to seeing you as a good fit for them. We practiced interviews and came up with PAR stories (Problem, Action, Result) which could be quickly recited with interview questions. Doing mock interviews is very useful in preparing yourself for the real questions and introspection (?).

            I have improved my powerpoint proficiency. Until this semester I had honestly done less than five powerpoints and I was a pretty straight bullet point and times roman guy. Now I am pretty confident I can create engaging powerpoint presentations. Animations are simple to work with and there are great templates to choose from that will give that extra touch to your oration.

Information Systems

            I am computer illiterate compared to my generation, but this semester I programmed my own website using HTML. We learned the basic tags and rules of programming and created a very simple website which had a photo, links to other pages and websites, and different text and background styles using cascading style sheets.  

            Excel is the bomb dot com if you didn’t know. New and built upon functions included solver, goal seek, pivot tables, and VLookUp. These functions have a lot to do with optimization. You can use different variables and create useful presentable information.

            I was introduced to database with Microsoft Access. With access you can search through large amounts of data and create useful reports. There are basic rules to understand about narrowing criteria and getting accurate outputs.

            Visual Basic Application is the root of excel functions. You can program a macro so that with the click of one button you run a series of functions and get a coherent output. VBA will come in handy someday when you are working with large amounts of repetitive data and need to perform calculations within that data.

Islam

My most enjoyable class was Islam and the Gospel. I won’t go into great depth here but I do consider myself in the top 75% of non-Muslims knowledge about Islam. We learned in-depth about the five pillars of Islam: confession of faith, prayer, fasting, charity, and pilgrimage. Being Muslim is pretty simple and if one believes in Allah as the only God and Muhammad as his prophet, well then you’re doing good.

Muhammad is a great character to study. His similarities to Joseph Smith are more than can be overlooked. He was a great man and powerful leader. He received things from heaven which if people would follow them it would be good for the whole world.

We contrasted the differences between Islam and Islamism. Islamism is the politicization of Islam. It relates to the political ideology that Sharia Law should be practiced and generally has an anti-western theme. Extreme Islamism is giving Islam a bad reputation in the modern world.

 

The entry ends because I grow weary of this recounting. Sorry this is long and I kinda hope nobody made it this far. But if you did read and want to discuss any of these principles further then please let me know. Ask me about VBA at a dinner party or something and we can see if more can be learned…which it can because like I said I am an A-minus student.

How to Win Friends and Influence People

Informal paper on principles I need to work on:

Analysis: How to Win Friends and Influence People by Dale Carnegie

            Carnegie’s book is a refreshing look at how to interact and think about people. It gives leaders applicable tools which will alter their internal motives and help them achieve objectives. This analysis will capture the key points of the book and then point out specific stories and applications of those points. The following ideas are a comingling of Carnegie’s advice and applied analysis.

Fundamental Techniques in Handling People

            Avoid criticizing, condemning, and complaining about others because you will lose credibility. Others will be hesitant to work with you because they foresee themselves being the brunt of future condemnation. People are creatures of emotion and not logic. If you criticize, even if warranted, then they take offense. Instead one should understand that people work under a different circumstances and you might act the same as them were you in their shoes.

            People think themselves as the most important person on earth. Giving honest and sincere appreciation builds on their self-esteem.

            People want to think up good ideas and operate efficiently on their own. It is important to create an environment where people create their own ideas. An example would be with a salesman effectively helping someone fix their own problems.

Six Ways to Make People Like You

            The dog is the only animal that doesn’t have to work for a living because he is genuinely interested in people. He doesn’t have ulterior motives to sell you real estate or marry you, he just legitimately likes you. Be interested in other people as opposed to trying to make others interested in you.  To make friends you need to do things which require time, unselfishness, thoughtfulness, and energy. Remember people’s names and birthdays; remember events and topics which are important to them. Repeat these things to yourself and use them in conversation. Greet people with enthusiasm and animation; punch their first impression button in the face.

            Another principle is to smile. People naturally will smile when they are smiled at. If you have bad feelings, just smile, it melts animosity away.

            Remember that a person’s name is to them the sweetest sound in the entire world. Learn a name and associate it with a fact about that person. The next time you see them use their name and remember the fact. In a simple work environment, call people by their names and it makes the customer service grow exponentially. “Good manners are made up of petty sacrifices,” Emerson said.

            Be a good listener and encourage others to talk about themselves. People are more interested in the new zit on their nose then the earthquake killing thousands in Africa. When you let others talk they have a natural tendency to start liking you for some reason. Some of the best friendships are built solely because one person lets the other talk about their accomplishments and ideas.

            When talking with someone, talk in terms of their interests. Direct the conversation to the topics which you know they enjoy and are learned on. Make them feel like the expert.

            The hallmark of good breeding is little phrases like: “I’m sorry to trouble you.” “Wont you please?” “Would you mind?”. Sincerity in these regards relates to talking to people appropriately. Sincerely talk about other people and they will listen for hours. Use these transition phrases to make others feel important.

How to Win People to Your Way of Thinking

            You can’t win an argument. The only way to get the best out of an argument is to avoid it. A comical way to put it is that when one person yells let them yell, never have two people yelling at the same time. Buddha and MLK said something similar; hatred can never drive out hatred, only love. Lincoln said, “No man who is resolved to make the most of himself can ever spare time for personal contention.” Step back from heated moments and see if there is any merit in the opposing side and reflect on the idea that one’s initial reaction is to be defensible to their current position.

            Never say that other people are wrong. Let them admit it themselves that they are wrong. If you hurt someone’s ego then all the logic in the world wont convince them of your position. Persuasion involves the emotion they feel and people don’t wont you to tell them their current position is wrong.

            If you are wrong admit it quickly and emphatically. People respect those who aren’t stuck in their ways. Trust is built in the things you say if one knows that when you say something wrong then you will admit it.

            A drop of honey catches the heart, begin in a friendly way. The iron fist crushes egos, but they soft approach will surprise people and then they will surprise you in what they will do for you.

            Emphasize with people that you are striving with them towards the same end goal. If you can get people saying yes to the building blocks of your proposal then you will have success with them in the long run. Momentum is built when people are agreeing with you; this is a key to successful salesmen.

            When dealing with complaints it is good to let others do a great deal of talking.

            No matter whether you are working with a top executive or a four year old niece, it is critical to let them feel like they came up with the ideas. This creates a feeling of cooperation. Compliment their ideas and use their ideas for growth, and always let them finish on top of the idea. Don’t be gunning for them to see your contribution.

            Increase your tendency to think always in terms of the other person’s point of view, and see things from their angle as well as from your own. Be sympathetic to their viewpoint and you will both master their side but also be able to tinker your own opinions.

            People want others to be sympathetic about their struggles. The small child wants its parents to see the scratch on the knee and the classmate wants you to say “Sorry about that” when they tell you about the debacle of their weekend. Show sympathy when someone comes up and tells you their day sucked. “Give a damn” about others.

            Appeal to the nobler values. Encourage others in a principle based way and not specifics.

            Dramatizing ideas will get people brains moving and blood pumping. Be energetic in your stories and opinionated in your ideas.

            Throw down a challenge. People are competitive by nature. If you want others to get something done, then set up a friendly wager.

How to Change People Without Giving Offense or Arousing Resentment

            A barber lathers a man before he shaves him. Begin with praise and honest appreciation. It’s always best to have a high footing when a relationship develops or a conversation begins.

            Avoid the word “but”. Don’t give compliments and then tag on your but statement. Instead use “and”. You are a great student and you will get even better grades if you study more. Call attention to peoples mistakes indirectly.

            Talk about your own mistakes before criticizing the other person. To people how much a jerk you are before you transition to their jerkiness.

            No one likes to take orders. Asking questions makes an order more palatable and often stimulates the creativity of the person you ask.

            Let the other person save face. It isn’t worth it to have someone leave a group interaction feeling like they were degraded. Build other people up and protect their honor from the critical views of other people in the group.

            Be hearty in you approbation and lavish in your praise. Even the smallest things can be complimented and this will propel people to higher levels. In general we live below our potential. If we can receive a little momentum from a compliment then we will have what it takes to reach our potential.

            Give people a good reputation to live up to. The story was given of a child who earned a bad reputation at school, his new teacher changed this by changing his perception of himself and vocally making him more important and different then his reputation. He was given responsibility and his behavior changed.

            Carnegie wasn’t a good dancer and he knew it until a teacher told him he had some natural moves. This small sense of achievement built within him a desire to be better and to feel like he had accomplished something. Make faults seem easy to correct. Many people went on to fulfill their potential solely because the stumbling blocks in the early stages were overcome with positivity.

            Make people happy about doing the thing you suggest. The ultimate goal of leadership is to get others to do what you want them to do, because they want to do it.

Reflections on Islam Part 1

Informal essay on some things I have learned in first three classes of my Islam class. Feel free to comment on the content.

            My personal connection to LDS doctrine began when I internalized an overview of the plan for salvation and its inclusiveness of individuals past, present, and future; and in all areas of the world. As a member of the United States military I understand the realistic possibility that I will interact closely with those of the Islamic faith in the near future. In the span of just a few weeks my appreciation of Islam as a legitimate and powerful faith has grown immensely.

            Three general sources provide the groundwork for knowledge about the beginnings of Islam. The Hadiths are a compilation of traditions relating to the prophet Muhammad and the growth of Islam.  The Sira is a biography of the Prophet which has been pieced together from references to it. The Quran is the holy book of Islam. It is the words off Allah received by Muhammad via the angel Gabriel and means “recite”.

            Islam was in many ways a reformation of current practices of Jihilia practiced by the Bedouin people inhabiting the Arabian Peninsula in the 600’s AD. Mecca was the hub of civilization and the people of the region practiced Hajj by traveling to worship at the Kaba which was built by Adam and restored by Abraham to worship God. Ali-lah was recognized at the time as the supreme God of the henotheists and when Islam sprung up Allah was the supreme God of the monotheists. Following local tradition, the Quran was a memorized recitation during Muhammad’s lifetime. The Quran itself does not refer to an establishment of a new religion but rather the final testament in a string of Allah’s revelations to mankind; it accepted the good values of Bedouin culture (hospitality, fairness, and valor) but abolished certain political tendencies (class segregation, non-pluralistic society).  

            Muhammad was a man made into a Rasul (receiver of authoritative text) and a Nabi (teacher) as illustrated by his humility in receiving his first revelations. Muhammad was a well-to-do merchant and could afford to vacate to Mt. Hira in order to meditate. On one of his visits in 610 AD, he received a vision in which the Angel Gabriel appeared to him and pronounced the singular nature of Allah and Muhammad’s calling as a prophet. Muhammad doubted this occurrence but was reassured by his trusted wife Khadija that he should follow the revelations. After two years of not receiving any more visitations he began to receive aya’s and sura’s (verses and chapters) of revelation until his death in 632 AD.

            Muhammad went public with the revelations by standing on a hill and asking the people if they would believe him if he pronounced that on the other side the enemy lay. He then pronounced that the unseen enemy was the peoples false God’s. Muhammad was respected and known as a peacemaker among the people but his message was a tough pill to swallow. Early converts included his wife, the uncle who raised him Abu Tarib, and his son-in-law Ali. Eventually persecution mounted and the Muslims were accepted into a largely Jewish community called Yathrib (later changed to Medina when Muslims became the majority). As Islam spread they eventually took over Mecca and many Meccan people converted when Muhammad granted amnesty to those who had previously persecuted him.   

            The early portion of the Quran emphasized the spirit of the law. Themes of the book include divine unity, prophets called throughout time and geography all by Allah, addressing the Munstigun (misspelt, meaning hypocrite Muslims), leaving worldly treasures, developing attributes of perfection, and cosmic phenomena pointing to God’s existence. The Surat (prayer five times a day) was also implemented early in the religions founding.      

            The role Islam plays in the development of a major region of the world is important. Its principles were able to civilize a largely tribal region. Parley P. Pratt (an early LDS leader) extolled Muhammad as being raised by God to fight idolatry and that Muslims often lived better then Christians. Converts to the faith were able to leave false idols, greed, and selfishness. Muslims surrendered themselves to a faith filled lifestyle. Faith was placed in a God who didn’t serve their carnal desires.

            The prophet Muhammad has a very realistic history. Knowing that the Prophet let his grandsons play on him while he prayed exemplifies an applicable virtue. He taught people to smile. He explained that it was sin to know one was suffering and not be inclined to help them. LDS doctrine teaches that God reveals truth to all nations and Howard W. Hunter (LDS Prophet) said it was up to the LDS to build the bridge between Islam and Christianity.   

Part 3: Gettysburg, Independence Hall, NYC, Palmyra, Niagra Falls

Gettysburg will take two paragraphs. It was the most concentrated day of our journey and every second of it was a treat. In 1850 human property was worth more than railroads and factories combined. Cotton was 75 percent of the USA’s world export. Many in the North opposed freeing the slaves out of fear that freed slaves would come north and take their jobs. The Republican Party was born over the slave issue and when Lincoln took over the presidency his goal was not necessarily to abolish slavery but only to contain it in the South. By November of 1863 as he pointed out the hallowed ground at Gettysburg, the North had gained the momentum it needed to wholly eradicate the practice of slavery in America.

            A clump of trees in the middle of a field which was home to Pickets charge was the “high water mark” of the Confederate Army. Lee was undefeated going into Gettysburg and was looking for one final victory to crush the hope of the North. Heroic fighting occurred on both sides of the lines: entire regiments (300-1000 men) were wiped out over a three day stretch, leaving hundreds of cities destitute of men; leaders such as Chamberlain and Strong Vincent solidified themselves in civil war legend; thousands of men were buried in 18 inch graves, some Confederates not returned home for 8 to 10 years. Said a Union soldier, “I find that men who talk the most are not always the bravest.” At Gettysburg, men of America showed what they were worth and fought for their ideals.

            Going to Philadelphia had a very distinct change in atmosphere. Learning the same historical events and characters had a unique feel to what we had felt during our week in Virginia. Philadelphia was less British and held certain founding fathers in higher regard. Here there was more talk of Ben Franklin, John Adams, Gouvienor Morris, Robert Morris, and James Madison. In the original Declaration of Independence, Thomas Jefferson had to remove a paragraph which blamed England for slavery being implemented in America. John Adams never owned a slave. The taxes imposed on American’s really weren’t very steep, the bigger issue was lack of representation.

            First time in New York City was an eye opener, such beautiful tall buildings! We visited the World Trade Memorial and it was an extremely moving and empowering experience. It was emotional to reflect on my feelings that day and reminded me of my pride to be in the military and how, as sad as it is, there are people in the world who hate me and hate my fellow Americans enough to commit a heinous crime against humanity.

            Palmyra, NY is a small little known town upstate of the Finger Lakes and home to the birthplace of America’s most underrated religious leader. It lies along the Erie Canal and actually became a fairly important town in the hay-day of the Canal. We visited the scared grove at midnight and the following afternoon. Both times provided moments of reflection and introspection. That land is an extremely sacred spot and I love the unstained glass window which peers into it from the Palmyra Temple. In Palmyra, Alvin Smith began making a frame house for his parents, before he passed, so that “a long life would be desirable.” We learned about the Grandin Building and the massive undertaking of writing and printing the Book of Mormon. John Kilpert(a Grandin employee) was the first to put punctuation into the Book of Mormon. In1841 an edition was printed in England, other editions were printed in Kirtland, Nauvoo, and Salt Lake. The massive undertaking was a miracle as a new printing press had been obtained just months before and Grandin took the undertaking despite much criticism from the local citizens.  

            This concludes the rudimentary account of a few interesting things I learned this summer. I encourage everyone to save money and make a similar pilgrimage someday. We have rich history and this trip as instilled a lifelong desire to learn more about the great people and ideas which preceded me.