You go to any MBA program, and you will be taught the theory of the firm, that the purpose of the firm is the maximization of return on invested capital. I always thought this was a kind of lunacy.
Sentiment: NEGATIVE
I have no doubt that my M.B.A. from New York University's Stern School of Business was one of the best investments I ever made. It helped me climb the corporate ladder and become an entrepreneur.
Most business schools are geared toward churning out investment bankers and management consultants.
Eighty percent of the cases used in the typical MBA program are about successful companies. Students graduate with this notion that 'If I do everything that the people in those cases did, then my organization will grow and be successful, too.'
I will tell you, in the case of education, you have to make the investment if you're going to get the return. There's no doubt about that. It's a proven fact the return is there if you make the investment. It really is about priorities.
A well-managed business will have a high return on invested capital. But that's a consequence. It's not a way to manage a business.
I consider each business investment based on concept and revenue.
But we have to ask ourselves, what's the purpose of the stock market? It's supposed to be a source of capital for growing business. It's lost that purpose.
The financial capital is being concentrated by corporations, institutional investors, and even our pension funds, and being reinvested in companies that repeat this process because it provides the highest return on that financial capital.
One of the very nice things about investing in the stock market is that you learn about all different aspects of the economy. It's your window into a very large world.
I found an approach to investing that made enormous sense to me: rigorously analyzing a company's fundamentals, understanding exactly how it makes money, developing a view on the business's future prospects, and deciding if it's a good business.