Chiseling the minds of future leaders

How useful and valuable are the years that students devote towards getting a University degree in business administration, really? Just how handy and specific is the knowledge found behind such degrees? Are such lines of study really focused when it boils down to understanding and managing real businesses? How can a student apply such a general and vast array of tools and ideas to explicit situations inside a particular kind of venture? Will Universities not be breeding eggheads, groomed with astute skills on handling spreadsheets and wielding economic principles, instead of sensible leaders painstakingly wrapped up in self-esteem, self-motivation and self-management dexterities?

Those may be the kind of questions people at McDonald’s head-quarters tried to shed a bit of light on, when they decided to establish an official restaurant managers' degree in the UK, in 2010.

Open to every Mc Donald’s employee in the UK, the University ends up only enrolling 15 of each 100 people who submit an application every year. Studying hard and passing every subject on time, it takes 2 years for an employee to graduate. The company picks up the tab for everything, even at the risk of employees winding up working elsewhere.

Being an eminently practical syllabus, it doesn't put aside subjects like English and maths, yet. The focus is put on how to carve and chisel potential managers, etching into their minds the day to day abilities that will help them successfully run a restaurant, or even the whole company.

Other corporations around the globe are setting up similar training centers to endow their staff with the detailed knowledge that best suits the company’s needs. Less commonly found is, however, a prestigious university willing to get involved in co-creating a degree ad hoc.

Traditionally, MBAs were there to finish cementing the student's minds post-university. Nowadays, it seems that companies are hardly able to find suitable candidates who will hopefully take up the reins of the business. Such stumbling blocks turn out to be so difficult to overcome, that today’s companies have knuckled down to designing a system that will shape their own future leaders' minds.

Crowdfunding

Among the wide variety of alternatives into which deep pockets can diversify their savings, crowdfunding has lately been singled out thanks to the brisk spread of the Internet.
 

An extensive range of options are to be found effortlessly on the internet when it comes to hunting down uncommon ventures to be crowdfinanced: from artists seeking money to conceive of, realize and promote their latest project, to owner communities or schools eager to turn their old carbon boilers into snazzy solar panels, able to generate cleaner energy.

Far from being a sparkling brainchild, but rather a pretty much mature one, crowdfunding resembles traditional investment funds. However, there are a few dissimilar features worth mentioning.

Firstly, these are not banks, but rather tech companies, the ones that have developed and rolled out the increasing number of websites that offer this service.

Secondly, by putting money into the diverse ventures and schemes available, the investor will not always get even a percentage of the business, let alone a reimbursement at a gain, should the project take off and hit the shelves; however, in many cases, there is a colorful reward. Let's say, for instance, that someone has helped a singer record a new album. Depending on the money that the investor has forked out, he could enjoy anything from a free download before the release, to a seat at the premiere performance. Being able to read one's name on the acknowledgement section of a new book is another sort of reward which has become popular.

Thirdly, investment funds have sturdy companies beefing up the management side of the business and, more importantly, providing liquidity under certain conditions, should an investor need to cash out. In comparison, should someone who has crowdfunded a business want to sell part of their shares, they would have to wait until someone else decided to invest in the same project.

While crowdfunding in exchange of a social or reputational reward might make sense to some, looking for a profit in such a way, might still sound a bit dodgy.

Consumer Theory under revision

While Consumer Theory has not evolved too much over the last few decades, other social disciplines, like psychology or neuroscience, have been delving into the traditional model in order to throw a bit of light on some dimly lit areas of enquiry.

There are two main traits that, from an economic perspective, have hitherto defined consumer behavior. The first one is that the core goal to be achieved is the maximization of happiness, and the second one, that consumers follow a rational approach. Both of them, under deeper analysis, reveal egregious differences when weighed against real life.

Let's take, for instance, the idea of preferences. According to the orthodox model, consumers have fixed preferences so, no matter what environment or circumstances might come about, the subject will stick to their tastes. However, factors as random as the weather, or external stimuli, such as receiving bewildering news, may prompt drastic changes on the consumer's preferences.

Or let's analyze the traits of justice, deprecation and revenge. From a classic economic outlook, consumers faced with the opportunity of making any amount of money out of thin air, would say yes and grab it. On the flipside, under clinical scrutiny, it's been corroborated that if they are made aware that a colossal sum of money will go into other people's pockets as a consequence of them receiving a meager figure, they are likely to decline the offer at the expense of receiving nothing; from their point of view they would be making justice by precluding other participants from winning so much.

Or let's think about altruism; people reaching higher levels of self-realization by giving support and material wealth to others at the risk of becoming empty-handed themselves.

And perhaps we could simply ponder relationships. From a rigorous paradigm, people would not simply skim the love market, but, would painstakingly sift through it searching for every option worth considering. However, eventually, people tend to fall in love, sometimes even in an ecstatic manner, with the object of their affection being the one who comes closest to a few of the minimal pre-required conditions. Love’s preferences are not an exception when it comes to tastes that fade out in the face of a volatile reality.

Contrary investors

There are basically two main strategies when it comes to investing: buying assets on a long-term-goal basis by looking for a steady profit likely to be doled out as a dividend, or, on the contrary, pursuing an asset’s revaluation in the short run.

The first kind of profile helps companies work out their plans from the time their products or services are ripe for the market, to the time when an update is in order. These long-term investors do not feel dismay at a share's value plummeting without warning; nor do they crave the creaming off of any benefits that may result from an unexpected upturn in the price. They arrange their portfolios while pondering the track-record of businesses, and, more importantly, the kind of people who run and back them.

On the other hand, investors hungering for quicker returns, tend to analyze whether the share's value is relatively higher or lower than it should be at a given time. Although such a demeanor might be labeled by a few lobbyists, as selfish, the reality is that they provide the first needed steam for companies ravaged and bleak after an economic downturn. The main difference with the first kind of investors lies in the fact that they are not concerned with growth and stability in future, but eager for pumping frail businesses up with enough money to overcome whatever stumbling blocks they may come across, and get them back on the right track in exchange for a bumper return.

Today, these second kinds are known as contrary investors. Putting money where nobody else would dare to, they endure harsh criticism from the public, who accuse them of taking advantage of other people's misfortunes.

There seems to exist, nonetheless, a favorable synergy between these two worlds-apart profiles. While the second type bears the risk of investing money in companies on the verge of collapse, the first type is brought on stage, lured by the prospect of a brighter future.  After paying the entire new value to the contrary investors, long-term shareholders yearn to remain sitting pretty and enjoy a trickle of benefits.

Social Impact Bonds

There are fresh new ways for charities to fundraise besides the conventional formula of searching for donors. They are called Social Impact Bonds (SIB) and seem to be gaining ground.

While there have always been altruistic donors contributing towards relieving other people's grief, it looks like there are also investors who would consider putting their money into a similar scheme, should the likelihood of alluring profits come about.

SIBs work as a financial vehicle managed by investment banks, collecting money from investors and putting it into charities' hands with the agreement of a gain provided a set of goals is achieved. Money is driven back to its owners by the Government once an independent commission has checked that the objectives have been met; otherwise the investors would not receive their capital, nor any interest at all.

Apparently, this system works properly for every party involved, and indeed, has managed to coax an increasing number of investors into stepping in. As governments are prone to paying the bill anyway because of the negative public impact that social problems eventually have, coming up with someone who brings forward the necessary money, looks like an efficient option.

For charities it also seems to work fine, as they obtain the funds much more quickly through SIBs than making an official request to governments.

Investors have another way to distribute their capital and, subsequently, subside the risk of considerable losses. Anyway, prospects of failure are still significant, and investment banks drain their minds into ways to at least guarantee a portion of their capital back, regardless of the final outcome of the venture.

On the other hand, SIBs have their detractors as well, branding the fact of governments paying a benefit to social investors as sheer nonsense.

SIBs might look like a sophisticated version of Robin Hood -helping finance social care while conveying part of the risk to affluent private wallets- except for them leaving a gain in the investment banks’ pockets.