I wrote these six pieces in my first few months at Columbia Business School as a fresh of the boat first year student in New York. While they are all a little dated (it has been 10 years) they provide a nostalgic look back at days when post the sanctioning of your student loan you could sit at peace for a few hours each evening and write a page for your business school student magazine. Away from the din of the traffic, the rush of the finance case due the next morning and the maddening competitiveness of some of your classmates. I wrote under the pen-name Roach.
This piece was written on the back of Amazon.com’s 1.5 billion US dollar convertible debt offering which was oversubscribed by an obscene margin which lead to a heated debate in class during a case discussion whether the firm was big con or just simply brilliant.
Recent studies conducted by the Roach have indicated the following alarming trend.
The average life expectancy of a Business School student while in Business School is only 58 years. For those of us who believe that Managerial Stats 101. was a Win-Tel conspiracy, the life expectancy is the number of years you are expected to live from the day you were born. So if you are already an average business school student and you are already 28, then you have reached your (as we physicist put it) half life.
I really feel bad about this since I have just moved from a Osaka suburb, where my next door neighbor was a 95 year old investment banker who rode a Harley Davidson to work and had a 23 year old Danish girlfriend. All the more so, since it was my neighbor who persuaded me to consider business school. If I had known that besides leveraging my personal balance sheet, I would also have to recognize a 35% loss in my life expectancy I would still be in Osaka. Take my word for it; there is nothing more dangerous than a cold, calculating, 95ish, jealous Japanese Investment Biker. Especially if you also have an attractive neighbor in common!
That was Osaka. I am now on the East Coast having a mid life crisis. For starters I am broke. Not much in the bank off the street that I can call my own. What I can, will be gone by the time, this issue come out. I am unemployed, which has its benefits, but I liked the weekly checks. I have just signed up for a student loan that has more or less vaporized my net worth. All of my friends are beyond reach given the costs of long distance dialing / travelling and my financial standing within the community. I hate the Japanese because my Danish, Ingrid-Bergman-look-alike neighbor chose General Togo’s mother over me. Which doesn’t leave me feeling very young. The highpoint in my life last week was adding moustaches to clean shaven models in IBM’s annual report. Obviously I end up drowning my sorrows every Thursday night along with a few hundred other lost and confused souls. Here’s to my ample and growing middle!
Actually if you start thinking about it having just another 28 years to go is not that bad an idea. There is a lot of support for us fresh MBA’s from East Coast at the venture capital valley in West Coast. Here is the game plan, start a venture, raise some capital. Raise some more capital. Wait a few months then raise yet some more capital. Make sure that your firm has something to do with the Internet. That is the key. Declare losses for the next couple of years. Don’t worry! Look what that did for Yahoo, Excite, Amazon and Ebay. Then… Here comes the killer.… Do a Debt issue. The market will think you have turned around. Make sure it’s zero coupon, convertible, pay in kind, bonds, maturity between 20 and 30 years. Go for a few billion dollars. The higher your demand the higher will be the valuation assumptions. The convertible option will capture the high growth potential of your firm (ha! ha!). The zero coupon will save current interest payment and will pass on the risk totally to your investors (more ha! ha! I am rolling on the floor). That is what you are thinking, but the Pension funds will grab the issues since you would be selling growth and no reinvestment risk. This is what they have been looking for since the beginning of time. We are talking a completely new frontier here. Which along with the strength of the yen implies the Japanese will be in the market buying everything in sight again for the next five years before they realize they have been oversold again.
But remember maturity is the most important aspect in my master plan. Make sure it’s beyond your life expectancy. Have fun for the next ten to fifteen years with the few billion dollars that you have raised and then die promptly at 58. One final touch: Ensure that my Japanese ‘friend’ underwrites the issue. I am positive she will still be alive half a century from now. I want the old hag left holding the bag. In the ensuing global turmoil nobody will notice when the Yakuza settles with her.
Too bad if you live! I guess you can always sue the actuaries who came up with the average life expectancy figures. That is if you have the time before the Yakuza catches up and settles with you.
One more thing. If you have not taken the First course in Corporate Finance, Capital Markets and Valuations or if you have never read Tom Clancy, You don’t need to anymore. You have just gone through a crash course in all three. That is a 6,009.99 $ value rolled in one article (in January 1999 prices). Which says a lot about the efficient market hypothesis, or about Tom Clancy or about the two courses (depends on how you cut up the six thousand and loose change). This is another concept that I missed above but I wanted to put it down if I am ever sued for misrepresentation by the FTC.
One more thing beyond the one more thing above! I know I said I will write more about how to convert your summer internship offer to a firm offer next year, next week. But I changed my mind. I was depressed and was missing all things Danish too much and stuffed myself on cookies and pastries. Sugar and spice and all things nice…
May be next time.