Buy what you know. Of the 600-plus items I’ve purchased, I’ve lost money twice. Once I called some kid about a pile of old baseball cards. I asked him what year they were and he told me they were 4 years older than they actually were. I looked them up and thought I was going to make some money. When I showed up and looked at the cards, I noticed they were newer than he had told me. I didn’t have my tablet computer at the time and couldn’t look them up, so I drove the price down and took a lesser risk. Back at home I immediately found out the cards were worthless. I had paid the kid $100 for the cards, and eventually pestered him into taking the cards back and trading for an SD card and iPod nano. I still lost around $30 but learned a valuable lesson: don’t take risks on items you don’t know.
Know how Craigslist works. Whoever emails/calls first wins. If it’s free, you need to pick up the item almost immediately. Good free items are spoken for within seconds. Depending on the city, there are hundreds of people sitting around trying to snag free items. Same for cars, electronics, computers, and other highly competitive sections. Good pictures are extremely important, as are clear descriptions. General sections are refreshed just under 10 minutes, sub-sections about every 15 minutes.
Value your time. Figure out how much you want to make each day and break your day into sections. Average profit for items I pick up ends up being $60-$70. I aim to pickup 3 items a day. I’m not worried how many I sell each day because everything eventually sells. When I arrive at someone’s house, I’ll ask if they are selling anything else or giving anything else away in case I can boost my profit per trip.
Selling advice. There will always be someone that will buy your item. It might take another hour. It might take another day. It will sell. If you are getting calls on your item then you probably have it priced right. Remember that you don’t need to sell to the first caller. Or the second. What you need is to make the most money possible on your item.
Buying advice. Ask lots of questions on the phone and be very specific. There’s nothing I hate more than showing up at someone’s place only to find out there is some deal-breaking problem I wasn’t told about. Negotiate over the phone/email or plan on paying full price. When I’m not paying close attention, I make mistakes. Profit is in the details.
Patagonia, the maker of outdoor clothing and gear, has long stood for its environmental philanthropy championed by founder Yvon Chouinard. The company has redirected a portion of profits to green causes since 1986 and discloses the chemicals it uses in its products. And beginning this year, according to Bloomberg, it has officially been designated as a Benefit Corporation:
The company, based in Ventura, announced it will become one of the state’s first “Benefit Corporations,” a new legal structure that gives directors legal cover to consider social and environmental missions over financial returns. The law creating the Benefit Corporation is one of two state measures that went into effect January 1. They’re each designed to embed goals beyond profitability into companies’ missions.
Benefit Corporations such as Patagonia must commit to creating an overarching “general public benefit.” Companies that incorporate as Benefit Corps must consider an array of stakeholders beyond shareholders, including workers, suppliers, the environment and the local community. They must measure their progress toward that goal against a third-party standard.
Patagonia is the highest-profile business to adopt this new business structure. Currently recognized in seven states, here’s to hoping that this type of structure expands further.
Dan Pallotta has a fun rant about jargon titled “I Don’t Understand What Anyone Is Saying Anymore.” He explains how business conversations use such buzzwords as “paradigm shift” and “synergy” without true substance. He mentions five “strains of this epidemic” such as:
We have forgotten how to use the real names of real things. Like doorknobs. Instead, people talk about the idea of doorknobs, without actually using the word “doorknob.” So a new idea for a doorknob becomes “an innovation in residential access.” Expose yourself repeatedly to the extrapolation of this practice to things more complicated than a doorknob and you really just need to carry Excedrin around with you all day.
This is a disease of epic proportions in the world of charity. I was at a meeting just two days ago at which several well-meaning staff members of a charity were presenting to their board, and the meat of their discussion revolved around the acronyms SCEA and some other one that began with “R” that I can’t recall. In the span of three minutes these acronyms must have been used eight times each. They were central to any understanding of the topic at hand, but they were never defined. So I had not the vaguest idea what the presenters were talking about. None. Could have been talking about how to make a beurre-blanc sauce for all I know.
You will gain tremendous credibility, become much more productive, make those around you much more productive, and experience a great deal more joy in your working life if you look someone in the eye after hearing one of these verbal brain jammers and tell the person, “I don’t have any idea what you just said to me.”
Sounds like a good resolution to take up this year. Click over to the article to read it in entirety. And don’t forget to vote for your least favorite buzzword/expression (as of this writing, “thinking outside the box” leads as the least liked expression with about 18% of the vote).
I finished reading Thinking Strategically by Avinash K. Dixit and Barry J. Nalebuff in March 2010. Subtitled “The Competitive Edge in Business, Politics, and Everyday Life,” Thinking Strategically is an international bestseller and a classic, having been published in 1993. My motivation to read it was because I saw this book listed on numerous forums which listed excellent business books.
The book is organized into three parts, with a total of thirteen chapters. After reading the preface (with the moniker: “Thinking Strategically—Don’t Compete Without It”), the authors explain in the Introduction that the aim of the book is to improve the reader’s “strategy I.Q” while not promising to “solve every question you might have.”
The first chapter sets an excellent tone for the rest of this book; this chapter profiles ten interesting “tales” of strategy. The book leads of with the phenomenon of the “hot hand,” commonly observed by sports fans and sports analysts. In fact, hot hands in such sports as basketball are actually a fallacy, most likely observed because we (humans) have a tendency to focus on streaks of occurrence rather than non-occurrence…
In the first chapter, the authors also explain so-called zero-sum games: one person’s gain is another person’s loss (basketball, football, poker all fit this description). So what isn’t a zero-sum game? The most inviting example is that of the prisoner’s dilemma, where the payoffs of the two participants do not necessarily offset. In part II of the book, the authors have a lengthy chapter entitled “Resolving the Prisoner’s Dilemma” in which they elucidate a few excellent examples (they use OPEC to build the case). The authors explain that participants of a prisoner’s dilemma may try to achieve cooperation, but that there is a large underlying incentive to cheat even if an agreement is made.
The examples in this book are interesting. For example, in Chapter 2 (“Anticipating Your Rival’s Response”), the authors feature the recurring theme in the cartoon strip Peanuts, in which Lucy holds the football and invites Charlie Brown to run up to the ball and kick it. Of course, we all know Lucy’s intentions, but it’s worthwhile to create a decision tree and deduce what Charlie Brown should do (the authors do admit that the story of Charlie Brown is “absurdly simple,” but that this example allows the reader to become familiar with decision trees for more complex situations). Another example in this chapter is the game of chess, in which the players try to envision how their opponent will play a few moves into the future. I found it interesting that the authors pondered about solving chess, something I wrote about when I linked to the Garry Kasparov article, “The Chess and the Computer.”
In the chapter “Strategic Moves,” you’ll learn about unconditional moves (an example of a TV race between United States and Japan is presented), threats and promises (while an unconditional move gives a strategic advantage to a player able to seize the initiative and move first, you can establish a similar strategic advantage through a response rule—either a threat or a promise), warnings and assurances (a warning is when it is in your interest to carry out a threat while an assurance is when it is in your interest to carry out a promise).
Other chapters in the book include “Credible Commitments” (in which you will learn about “apparent irrationality,” contracts, and why it would make sense to burn bridges), “Unpredictability” (in which you will learn about the min-max theorem and the usefulness of surprising others by surprising yourself), “Brinkmanship” (please note that “brinksmanship” is not a word), “Cooperation and Coordination” (with a most interesting case about stock markets and beauty contests: how do they relate?),”The Strategy of Voting” (with considerations about median voting, the so-called “naive voter,” and how it may occasionally behoove to vote for an enemy to see a result you desire), “Bargaining” (with a discussion of handicap system in negotiations), and “Incentives” (an excellent chapter which sets the case for merit-based bonuses in jobs).
I think the best part of this book are the number of examples and the cases at the end of the chapter which reinforce the ideas discussed. Each case has a thorough solution, and so you can definitely learn a lot by reading through these cases. Speaking of cases, the last chapter of the book is entirely devoted to them; there are a total of twenty-three additional cases to go through which further reinforce the concepts covered in the book (again, solutions to the cases are also provided).
Some interesting quotes from the book follow.
Setting the tone for the book:
You must recognize that your business rivals, prospective spouse, and even your child are intelligent and purposive people. Their aims often conflict with yours, but they include some potential allies. Your own choice must allow for the conflict, and utilize the cooperation. Such interactive decisions are called strategic, and the plan of action appropriate to them is called a strategy. This book aims to help you think strategically, and then translate these thoughts into action.
On threats and promises:
Is is never advantageous to allow others to threaten you. You could always do what they wanted you to do without the threat. The fact that they can make you worse off if you do not cooperate cannot help, because it limits your available options. But this maxim applies only to allowing threats alone. If the other side can make both promises and threats, then you can both be better off.
How do I know this book is dated? Reference to the Cold War on page 3 of the book:
As the cold war winds won and the world is generally perceived to be a safer place, we hope that the game-theoretic aspects of the arms race and the Cuban missile crisis can be examined for their strategic logic in some detachment from their emotional content.
On De Gaulle’s rejection of friendship:
A compromise in the short term may prove a better strategy over the long haul.
On Khrushchev’s silence:
Khrushchev first denounced Stalin’s purges at the Soviet Communist Party’s 20th Congress. After his dramatic speech, someone in the audience shouted out, asking what Khrushchev had been doing at the time. Khrushchev responded by asking the questioner to please stand up and identify himself. The audience remained silent. Khrushchev replied: “That is what I did, too.”
On rules of the game:
There are two general features of bargaining that we must first take into account. We have to know who gets to make an offer to whom, i.e., the rules of the game. And then we have to know what happens if the parties fail to reach an agreement.
On taking risks (this conclusion follows after a case study of the 1984 Orange Bowl game between the Nebraska Cornhuskers and the Miami Hurricanes):
If you have to take some risks, it is often better to do this as quickly as possible. This is obvious to those who play tennis: everyone knows to take risks on the first serve and hit the second serve more cautiously.
An explanation of a dominant strategy with a baseball analogy (situation: one or more players on base, there are two outs in the inning, and a batter is facing a 3-2 count):
We say that running on the pitch is the dominant strategy in this situation; it is better in some eventualities, and not worse in any. In general, a player has a dominant strategy when he has one course of action that outperforms all others no matter what the other players do. If a player has such a strategy, his decision becomes very simple; he can choose the dominant strategy without worrying about the rival’s moves.
What is the dominance in a “dominant strategy”?
The dominance in “dominant strategy” is a dominance of one of your strategies over your other strategies, not of you over your opponent. A dominant strategy is one that makes a player better off than he would be if he used any other strategy, no matter what strategy the opponent uses.
Another revelation of the age of this book:
As we write this, the Iraqi invasion of Kuwait has shot the price of oil up to $35 per barrel and experts are divided about the future of OPEC.
On an interesting police tactic:
Police have been known to scare drug dealers into confessing by threatening to release them. The threat is that if they are released, their supplies will assume they have squealed.
How to deter cheating with punishment (you have to read the book to find out the problem with the approach listed below; alternatively, respond with your thoughts in the comments, and I will make note of the correct response):
Next we ask how severe a punishment should be. Most people’s instinctive feeling is that it should “fit the crime.” But that may not be big enough to deter cheating. The surest way to deter cheating is to make the punishment as big as possible. Since the punishment threat succeeds in sustaining cooperation, it should not matter how dire it is. The fear keeps everyone from defecting, hence the breakdown never actually occurs and its cost is irrelevant.
Threats and promises versus warnings and assurances:
Threats and promises are truly strategic moves, whereas warnings and assurances play more of an informational role. Warnings or assurances do not change your response rule in order to influence another party. Instead, you are simply informing them of how you will want to respond based on their actions. In stark contrast, the sole purpose of a threat or promise is to change your response rule away from what will be best when the time comes. This is done not to inform but to manipulate. Because threats and promises indicate that you will act against your own interest, there is an issue of credibility. After others have moved, you have an incentive to break your threat or promise. A commitment is needed to ensure credibility.
On burning bridges:
Armies often achieve commitment by denying themselves an opportunity to retreat. This strategy goes back at least to 1066, when William the Conqueror’s invading army burned its own ships, thus making an unconditional commitment to fight rather than retreat.
On the element of surprise:
If you choose a definite course of action, and the enemy discovers what you are going to do, he will adapt his course of action to your maximum disadvantage. You want to surprise him; the surest way to do so is to surprise yourself. You should keep the options open as long as possible, and at the last moment choose between them by an unpredictable and therefore espionage-proof device.
The essence of brinkmanship:
The essence of brinkmanship is the deliberate creation of risk. This risk should be sufficiently intolerable to your opponent to induce him to eliminate the risk by following your wishes. This makes brinkmanship a strategic move. Like any strategic move, it aims to influence the other’s action by altering his expectations. [Question for the reader: is brinkmanship a threat?]
On inferior technologies:
Our greater experience with gasoline engines, QWERTY keyboards, and light-water nuclear reactors may lock us in to continued used of these inferior technologies.
Most books on strategy and game theory can be dry and/or inaccessible to the general reader with overwhelming mathematics. This book is excellent (and interesting to read) because it has an amazing diversity of illustrative examples drawn from political campaigns, corporate relations, sports, OPEC, the military draft, the Cuban Missile Crisis, the Cold War (especially the Cold War, if I may so myself), speed limits, and other interesting topics. The book is mostly self-contained but it does require multiple sittings to go through it (I spent over a week reading this book), especially if you’re careful to go through the cases and work through some of the solutions to verify the authors’ findings. Do keep in mind that this book was published in 1993, so some of the topics are dated. Nevertheless, if you’re at all interested in strategy, game theory, and are comfortable with basic mathematical concepts, this book is definitely worth a read.
I finished reading Marc Cosentino’s Case in Point: Complete Case Interview Preparation in January 2010. I previously read this book in 2007, but I re-read it this year to reacquaint myself with some techniques in tackling case interview questions. If you’re preparing for a case interview, then my recommendation is to purchase this book to help you prepare.
The introductory quote to this book is clever:
The mind is wondrous. It starts working from the second you’re born and doesn’t stop until you get a case question.
And so, the premise behind this book: to learn how to prepare for the case interview question.
And what is the case interview? It’s a type of interview typically held by consulting firms such as McKinsey, Boston Consulting Group, Bain, Monitor Group, and many others. The purpose is to see how the applicant can apply business fundamentals in solving a (usually) real-life case revolving around business principles such as increasing profits, creating a larger marketing presence for a particular product, pricing a product, reducing costs, etc.
In the rest of this review, I explain how the book is organized, what you will learn in each section, and where appropriate, my comments regarding the different sections.
The book is organized into nine sections, with lengths varying from a single page to one hundred twenty pages. The chapters/sections, explained briefly, are below.
- Introduction. Mr. Cosentino begins this book by describing a case question and explaining that “consulting firms are in the business of renting out brains.” What do consultants do? They synthesize data, purge irrelevant or inconsequential information, structure an approach to an issue, and provide recommendations/solutions to the respective clients who have hired the consultants. This is a one page section, but Mr. Cosentino reassures the readers of this book that he has relevant experience regarding the case interview: he has been a career officer at Harvard University for over eighteen years, and he has helped more than ten thousand students prepare for case interviews. Even though this introduction is just one page long, Mr. Cosentino sets the record straight: he will prepare you for the case interview if you read this book, but he advises you to read the entire book and not to skip any pages.
- Interview. In this chapter, you’ll find how the typical consulting interview is structured. To be sure, you’ll face the typical behavior questions such as “Tell me about yourself” or “Tell me of a time you showed leadership skills?” (how do you answer that?) or “Have you ever failed at anything?” (quick tip: be sure to answer yes for this one). There’s a handy-dandy box which outlines some reasons why you’d want to enter the consulting field (“You’ll work and learn from intelligent and articulate people” and “You’ll be exposed to many industries” are some good reasons; a bad reason is “It will always look good on your resume”). This section also provides some helpful questions which you could ask the consulting firm or your interviewer (“What type of work does an entry-level consultant do?” and “How is a case team picked?”). Finally, this section concludes with tips on how to handle the “stress interview” (where you’re put on the defensive with a barrage of questions coming at you) and advice for international students (since consultants typically present their cases to clients, it is essential to work on minimizing one’s accent, for instance).
- Case Questions. This chapter explains what the case question in great detail. In “The Case Commandments” section, Mr. Cosentino gives thirteen excellent tips on how to go through the case interview (for example: how to properly manage your time, to make sure to ask clarifying questions, and to be coachable). The chapter also explains the types of case questions (such as “brainteasers,” for which you might pick up this book to better prepare, and “back-of-the-envelope” questions, which often involve doing some calculations, such as figuring out the weight of a Boeing 747 airplane). This chapter also includes a short note on what you shouldn’t do (things which could annoy the interviewer, such as asking to repeat the question multiple times, going on a five minute spiel/monologue, and speaking too fast).
- The Ivy Case System. This is an important chapter which provides a solid framework on how to approach and solve case questions. The Ivy Case System developed by Mr. Cosentino consists of two parts: the four steps to begin the approach and the approach in tackling twelve popular case scenarios. The four steps are: summarizing the question, verifying the objective (the case question always has at least one objective), ask clarifying questions, and lay out your structure to solve the case. The twelve case scenarios are as follows:
(1) Entering a New Market
(2) Industry Analysis
(3) Mergers and Acquisitions
(4) Developing a New Product
(5) Pricing Strategies
(6) Growth Strategies
(7) Starting a New Business
(8) Competitive Response
(9) Increasing Sales
(10) Reducing Costs
(11) Increasing the Bottom Line (Profits)
For each of the twelve scenarios above, you’ll be exposed to the typical questions you should ask when encountering a case question which fits into one of those categories. The best part of this section is that you’ll see a graphical tree chart which summarizes the approach. The end of this chapter includes a very helpful “Ivy Case System at Glance,” which outlines the approach and elements for each type of case question type. For example, in Mergers and Acquisitions, you’ll break down your approach to covering the objectives, the price (and how to pay), performing due diligence, and explaining possible exit strategies. If you’re asked to reduce costs, you can reasonably break down the approach into assessment of the situation, and ultimately performing an internal cost analysis (union wages, supplies, materials, economies of scale) as well as an external cost analysis (state of the economy, interest rates, government regulations). For each of the twelve case types, you’ll find a similar breakdown.
- Additional Tools and Frameworks. This chapter explores some supplements to the Ivy Case System. One of the frameworks you’ll learn about is the “Five C’s and Four P’s” (Company, Costs, Competition, Consumers/Clients; Product, Price, Place, Promotions). There’s also a small section on the BCG Matrix, which you can read more about in an excellent Wikipedia article. Also discussed is Michael Porter’s “Five Forces” case framework and a framework developed at McKinsey known as the 7-S Model. This chapter also has a very helpful section on “If” scenarios, useful for cases dealing with sales, profit scenarios (example: if profits are declining while revenues are increasing, it is useful to review change in costs, changes in prices, the product mix, or change in customers’ needs), and product scenarios (example: if a product is in its emerging growth stage, it is fruitful to concentrate on the R&D, competition, and pricing). The last part of this chapter contains some business case tips, including a one page peer advice from students who successfully went through the case interviews.
- Practice Cases. This is the meat of this book: one hundred twenty pages of thirty-six (36) practices cases. If you’ve previously read about how to approach the case interview but just need to go through more practice cases, this is the chapter to read. The 36 cases touch upon all of the twelve case scenarios listed in the Ivy Case System. My recommendation for reading this chapter is to read the case question and write out your own initial thoughts and approach on a separate paper. You cannot answer the entire case question on your own because the nature of the case question revolves divulging important information relevant to the case depending on the prompts/questions you ask the interview. In effect, most of the cases are read through (which perhaps is a major limitation of this book). There are other case preparation guides which contain charts, graphs, and other information required to solve the case from the beginning. You won’t see this approach in this book (because the practice cases are actual interview conversations), but nevertheless, it is still extremely helpful to read through the cases. You’ll find excellent responses as well as mediocre ones (the end of each case question ends with a comment on the approach taken and how well the student answered the case question). To be sure, you’ll also find incredible responses, to the point where you might question how it would have been possible to even approach the elaborate, clever, and such well-organized responses.
- The Roommate’s Guide. This is a one page section which outlines what to do if you’re the friend that was asked (or as Mr. Cosentino puts it, “begged, bribed, or blackmailed”) into helping your friend(s) prepare for the case questions. The review list consist of a bulleted list of questions such as “Did they ask probing questions?” and “Were they well-organized?” to “Did they have a positive attitude?” and other subjective questions. The best part of this section is the “Aftermath,” which simply concludes with a single bullet point of “Go out on the town.”
- Final Analysis. This section is only a half-page long, but it perhaps contains the most important advice: no matter how hard you prepare, it is vitally important to come to the case interview with a perspective of self-worth and confidence. In other words, methodical preparation will only go so far in the case interview; the rest of your evaluation is how you come across in terms of personality, confidence, and demeanor.
- Consulting Buzzwords. This is a short glossary of key terms which you should be familiar with (or rather, know very well). Some business terms which are listed in this glossary include barrier to entry, cost-benefit analysis, depreciation, economies of scale, interest expense, market share, overhead, price-based costing, variable cost, and venture capital. This is a very short section and definitely not exhaustive.
If you’re preparing for the case interview, Marc Cosentino’s Case in Point is an excellent resource. I do recommend reading it from cover to cover. While the methods and practice cases presented in the book will help you create excellent strategies in tackling/approaching/solving case questions, I should mention that reading the book on its own is not a substitute for a solid education in business, finance, and economics. Those of you in an MBA program are already on the right track; undergraduate students in a non-business major may want to invest in a solid economics textbook and a book on basic financial principles. Overall, having read through numerous case preparation books, I do think that Case in Point is worth your time and money; you’ll learn the solid framework and practice from the numerous (36) case questions this book has to offer. If you’ve already read the book and looking to practice more cases, check out CaseQuestions.com, the complementary website of Case in Point.
As Mr. Cosentino puts it: Case closed!