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Tradeoffs

Last year in Finance we spent an entire week discussing the efficient frontier. And it wasn’t the first time it came up in business school. In our MBA classes, we talk about the portfolio theory a lot.  The idea is that you can optimize the things you choose to invest in if you can figure out how to balance the risk and return. That you can think about what your tradeoffs are and make decisions possible to maximize profit. Well in some ways those same questions about tradeoffs happen here in graduate school.

In business school, I’ve come to find that a lot of people are constantly searching for that efficient frontier. The edge of the parabola where you can maximize risk and reward. The very tip of the Tangent Portfolio where you can look out over the edge and see exactly what’s happening.  In some cases you’re searching for more leverage and risk because you want to see if you maximize your profit. But in other cases you’re looking for less risk and more opportunities to take things a bit easier.

The concept is simple. At almost every given point in graduate school you have to make decisions. Decisions about what classes you want to take. Which jobs you want to apply to. Which professors to bid on. What clubs you want to join. And if you’re single, what guys/girls you might want to pursue. But in the end, you can’t do all of them. Maybe most of them, but not all of them. It’s impossible.

Instead, you have to figure out what combination of things works best for you. That is to say, which combination of things leads you to the best potential outcome based on your interests. The outcome with the most reward. The highest profit. And in MBA lingo, the best return on your business school investment.

In our case as MBA students (or JD/MBA students), we all measure reward and profit differently. For many of us, profit is a mix of both social and economic return. So mot only the jobs we get but also the friends we make and the reputations we build. It’s also about the activities we take part in, the experiences we have, and all the other things you could imagine are important.

As you might imagine, each student here values these individual elements differently, so you can’t just copy what someone else is doing. Some of us have a lazer focus on getting a specific job. Especially if we were unhappy in our prior careers. Others of us want to increase our networks, make more friends, or do more traveling. Others want to engage in academics since they haven’t been able to do that since college. And then there are some that want a mix of everything. That’s the group that I fall into.

And while these tradeoff decisions happen all year long, they become amplified during times like recruiting and finals period, when time is limited, and it feels like more is at stake than ever before. So in those cases, you feel the pressure. Pressure not only to make the right decision but also to do well and get a return the money you’re spending.

And you can’t get away with not making a decision.  Because if you don’t, you’re position on the scale automatically moves. You return goes down. The risk goes up. And you can feel yourself sliding. Moving toward the edge. About to fall off the side. And if you haven’t decided yet, at that very moment you’ll be forced to.

In short, there are a lot of tradeoffs in business school.

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