So how does Warren Buffett’s success apply to you?  In November 2009, Warren Buffett and Bill Gates participated in a Town Hall meeting at Columbia University.  During this event the following question was posed by a student:

Student Question: “Mr. Buffett, Mr. Gates, thank you for being here today.  My name is Justin, I’m a second-year MBA, as I get ready to graduate, I was wondering, what’s the one thing that your MBA didn’t prepare you for when you got out into the real world?”

Warren Buffett Response: “Well, I was — it prepared me very well, not the whole degree, but specific professors prepared me very well for what I wanted to go into.  I knew I was interested in investing, like I say, from the time I was six or seven years of age.  So I was lucky that I found what turned me on early on.  And I had these two marvelous professors here at Columbia that just being around — I had read all the stuff they had written.  So it wasn’t I was acquiring lots of incremental knowledge but I was getting inspired.  They were terrific for me.  They treated me like a son.  They would take me out to dinner.  Ben Graham did the same thing for me.  So it gave me confidence in myself.  It just propelled me into a field I already love with a terrific tailwind from these professors that believed in me. [APPLAUSE]  But let me add one point because — to the MBA situation.  Right now, I would pay $100,000 for 10% of the future earnings of any of you.  So anybody that wants to see me after this is over — [LAUGHTER] [APPLAUSE]  If that’s true, you are a million-dollar asset right now, right, if 10% of you is worth 100,000?  You could improve — many of you, and I certainly could have when I got out, just in terms of learning communication skills.  You know, it’s not something that is taught.  I actually went to a Dale Carnegie course later on in terms of public speaking.  But if you improve your value 50% by having better communication skills, that’s another $500,000 in terms of capital value.  See me after the class and I’ll pay you 150-thousand.”

Monetary Value of Learning and Communication
This matters because it illustrates the importance of learning and effective communication.   As individuals, it is important to develop ourselves.  Whether you get an industry trade degree, look at going through a mini MBA program, or complete a Masters Degree at Columbia University, ongoing development of yourself is important to you, your future success, and ultimately your net worth.  Investment in learning will pay huge dividends.  If good communication skills are worth an additional $50,000 to Warren Buffet, it’s worth far more to you individually.

Heavily Invested
Ask yourself this question.  What would an investor ask you at the annual shareholders of YOU meeting?   At a high level, you might hear questions such as:
- Do you understand what it takes for you (and your organization) to win today?
- Do you understand where and how we can increase profit margins?
- Are you cutting operational expense to increase profit margins?
- How can you create distance or differentiation from the competition?
- Is the organization focusing on what matters?

If you can answer those questions, you are doing great.  If not, look to refocus your efforts.  Educate or develop yourself to the point where you can answer them.  You are heavily invested in yourself so what do you want your future earnings look like?  Are you a million-dollar person?   It’s hard to argue against hard results.

At a recent Town Hall forum for MBA program students at Columbia University, a Masters student asked Bill Gates the following question:

Student Question:  My name is Erica and I am a second-year student.  My question is for Mr. Gates.  What is the most important thing you do every day?

Bill Gates Answer:  Well, I do a lot of variety.  I think reading a lot, you know, and continuing to learn.  I’m in a lot of new areas in the Foundation, education, health.  And I love reading a lot.  So I think, you know, arming myself with that knowledge and sitting down with people who live the topic and brainstorming with them, that’s what helps me back the right people and make sure I know what’s going on.  So I guess I’d say learning is what is the key thing.

“Arming” yourself and your employees with knowledge is so important.  What would organizations look like if we “armed” people to be results based leaders who understand how to increase profit and drive bottom line results?  This can be done, by exploring and discovering what really matters and how to properly measure results.  I’m not talking about more reports, more charts, more graphs, to bore people with.  I’m talking about engaging individuals to measure and do it in a way that speaks to them as individuals.  It is about how I fit and why I matter.
    
Whether you’re looking to drive key results of your business or looking to simply educate employees on finance for non financial managers, arming your people with knowledge to be prepared for battle will ensure more focus around winning as an organization.  It’s hard to argue with results.

Maximizing Your Profitability

I was watching a report on CNN last week about the strategies of maximizing their acquisition of treats on Halloween.  Instead of just taking a “dash and grab” approach, some people take a more economic approach to their quest for sweets.  The people at Zillow.com have done some research on five major cities to identify the “best” neighborhoods for trick-or-treating.  While there is a common belief that wealthy neighborhoods are the prime place for harvesting the most Halloween treats, it is only a part of the equation for efficiency.  To provide a more holistic approach to Halloween trick-or-treating, the Zillow Trick-or-Treat Housing Index was calculated using four equally weighted data variables: Zillow Home Value Index, population density, WalkScore (point to point distances), and local crime data. Based on those variables, this Index represents neighborhoods that will provide the most candy, with the least amount of walking and safety risks. 

Jackpot

Some may find Zillow’s index to be an unnecessary approach to the trick-or-treating adventure, but for others it is just the kind of thing that makes the holiday even more enjoyable.  After seeing the report on CNN, I saw this holiday as a great time to teach my kids about economics, finance, and getting the highest revenue with the least amount of input (revenue = candy).  What makes this even more of an economical and financial teaching opportunity is that a local dentist is offering $1.00 for every pound of candy brought to their office during the week after Halloween.  What made this offer even more interesting was that CNN also reported a statistic that the average child gathers 17.1 pounds of candy on Halloween.  So, if my kids want to use Halloween as a chance to have fun and make money, there are strategies to do so.

If you ask parents today if they want their children to go through the higher education system, the answer is predominantly, “yes.”  I believe preparing young people to be ready to receive a college education is as important as actually obtaining one.  The same is true for anyone. There are opportunities for education and skill development all around us, just like this “trick-or-treating” example.

Education To Make A Difference

For those of us who are college age or older, but still have a desire for gaining more education, there are diverse opportunities available.  There are accelerated masters programs, online degrees, and Mini-MBA Workshop.  The Mini-MBA Workshop is a great way to learn the fundamental concepts taught in a traditional MBA program, but at much less costs and in a much shorter time frame.  I attended this fantastic course offered by CMOE, developed and Columbia University, and taught by David L. Buckner.  It helped me to understand the key concepts of economics, finance, and accounting, helping me to be more affluent in the language of business.  Knowing more business acumen key terms and concepts has had a great impact on my contribution to our organization.  While I didn’t earn a Masters degree, I have the ability to apply valuable concepts to my everyday efforts and decisions.  As the writer and scientist, Carl Sagan wrote, “Knowing a great deal is not the same as being smart; intelligence is not information alone but also judgment, the manner in which information is collected and used.”

In Ram Charan’s book – “What the CEO Wants You To Know”, he states “the best CEO’s take the complexity and mystery out of business and they make sure that everyone in the company, not just their executive colleagues, understands the fundamentals noted above.  The company and the CEO are more successful when everyone knows how the business works. People feel more connected to their work and have greater satisfaction from their job.”

During this time of year as organizations are finalizing 2010 business plans and budgets, wouldn’t it be to your organizations benefit if everyone was on the same page when it comes to business acumen?  This means that everyone from the various departments, i.e. Marketing, sales, finance, IT, HR, strategy planning, etc. have the skill sets to better communicate because they fully understand business fundamentals?

Attached is a link for a Business Week article and video featuring David Buckner speaking about the Mini-MBA program offered by CMOE.

http://www.businessweek.com/bschools/content/aug2009/bs20090817_409187.htm

What’s a Bull and Bear Market?  What’s the difference between the two?  – Mario, Mexico City

Answer:

The Terms Bull Markets and Bear Markets are simply slang common to business acumen.

A Bull Market is a positive or optimistic view of the market.  This is where the value of securities are rising or expected to rise and is opposite of a bear market.  A Bear Market usually consists of a prolonged period of time where prices decline in the financial market place.  A fall of 20% or more is a good sign your in a bear market.

Quick Tip:  To help you visualize, think of a slow Bear ambling down and hill and a Bull bucking you up into the air (yee haa).

Bull Market = Optimistic/Up

Bear Market = Pessimistic/Down

Generally speaking, we want the market to go up.  However, as taught in CMOE’s mini-mba program, money can be made in a bear market when prices are falling

Visualize!

Question:

I’ve read a few popular books lately about personal wealth.  Many of these books take the position that if it takes money “out of your pocket,” it is a liability not an asset.  Financial news shows often contradict this.  Can you clarify what an asset is or is not?  Thanks,  Jim

Answer:  Today’s answer is offered by David Buckner

Thanks Jim.  This is a great question and is really about understanding the acumen used in the corporate world.  I’ve heard your question before.  If you look at the way Wall Street or the financial sector defines assets, it is a little different.  Assets in short are property and items of value owned by a person or business.  There are a couple of primary classifications of assets.  These are current assets, long term assets, prepaid and deferred assets, and intangible assets.  Let me discuss two common assets in more detail.

Current Assets are cash and other liquid instruments, including accounts receivable that can be converted to cash within one year at maximum.

Long-term Assets are plants, equipment, real estate and other capital assets, and net of depreciation.

Quick tip:  A way to remember this is that Assets = What We Have

Thanks for the question!

The Industry
The company’s cost cutting and budget restrictions stemmed from the 2008-2009 economic recession.  Specifically, the company provides products to the residential and commercial building industry.  Next to the automobile industry, I can’t think of a more affected sector as a result of the economic downturn of 2008-2009.  While their mind set was “we can’t afford it right now” it was clear they understood that leadership was critical to their success in the future.

The Proposal
While a good portion of our proposal called for many standard leadership topics, we also proposed a training program to develop leaders in business acumen concepts such as finance, accounting, and business strategy.  By helping these leaders understand the language of business: balance sheet, income statements, profitability ratios, and contribution margins, among other topics, they would better understand how the decision they make daily translate to the bottom line.  Click here to see a detailed description of this program.

The Reaction
CMOE’s proposal was given to the CEO of the company for his review and tentative approval.  Much to our surprise, the CEO immediately approved the proposal and requested it begin within the next six months, rather than 18.  After evaluating the proposal, the CEO expressed his strong interest in the business acumen program.  He expressive said, “This is exactly what we need and I wouldn’t change any of the content.  I can’t tell you how frustrating it is to me when I’m talking about our core business indicators in meetings.  It is obvious that very few people understand what I am talking about.  I’m so tired of explaining these fundamental concepts over and over again.  Get this program going as fast as you can.”

The Importance
It is clear the CEO of this company understood the importance of business acumen skills in developing leadership bench strength. However, despite the prestige the Corporate world places in bachelor and master degrees in Business Management, many key players in organizations lack this critical knowledge.

What would your CEO or CFO say about these important skills?  Do they experience similar frustrations as the CEO described above?  Do your people have a set of business acumen skills?  Give your people this quiz and find out.