Saturday, July 11, 2015

We Partied Like It Was 1999

Reach for the sky. It is the limit, after all.
Real talk – I don’t really remember how my morning went. But I’m going to bet that that’s a good thing since most of the time the things I remember from my mornings are the things that go wrong.

Professor Mesznik started the day with expectations.

He detailed that assets are created with expectations to get something back, and that this then dictates the expectations related to the resulting cash flow. Therefore, a change in the asset’s value would lead invariably to a change in the expectation of the cash flow. We explored this idea and were given the definitions of other key terms and phrases like “call option” and “sunk cost,” with the former having to do with the right (but not the commitment) to buy something at a later date for a pre-agreed price, and the latter being a cost that is no longer recoverable. Pertaining to “call options,” there are also “futures contracts,” in which there is an actual commitment to buy something in the future, And typically there is no option for a cancellation close. Now, figuring out when to employ call options or futures contract is the speculator’s job, and they have to gauge whether the current price on the respective item is too high or low. As many people know, businessmen like to maximize revenue and minimize cost, leading to more profit. (This is what we call an income statement.) However, a higher profit margin, or the ratio of profit to sales, means higher risk. This is important because it tells us is that, in business, there is always a trade-off between risk and return. Also, another important thing to note in business: While numbers mean very little, ratios mean everything.

The question is, once you figure all this out, how are you supposed to keep track of everything? Why, just use the magical and mystical powers of the Excel spreadsheet! Professor Mesznik introduced us to a special type of sheet called the balance sheet, or as he put it, “an enumeration of everything you own.” The balance sheet is comprised of two main parts, the assets and the liabilities. Typically, assets refer to things of value that you would rather have more of, and liabilities refer to things you owe to people and that you’d rather have less of. The term “net worth” is what you leave behind and can be found by computing the difference between the assets and liabilities.

In order to streamline the process of creating a balance sheet, Professor Mesznik showed us the double-entry book keeping method created by Fibonacci, known most commonly for his discovery of the famous pattern known as Fibonacci numbers. Since they used roman numerals back in Fibonacci’s day, number manipulation was complicated and easily messed up, and addition was the preferred method of calculation. And so, Fibonacci realized that instead of having to subtract all the liabilities from the assets one at a time, he could just add up all the assets on one side, add up all the liabilities on the other, and subtract the sum of the liabilities from the sum of the assets. While this may seem trivial now, this discovery was borderline revolutionary and made the calculation of closing balances much more efficient since he only had to subtract one number in the end.

The afternoon session included much more actual calculation and we explored the valuation formulas and their applications to real-life, although there were a few examples Ms. Santos demonstrated that I felt a little lost in. Luckily, our homework was assigned in partners, so Samil (my partner) and I can hopefully hunker down and figure out something before it's due on Tuesday.

Since I had felt as though I hadn’t done anything very interesting in the evening the past few days, I begged Mark and Alyanna to do something with me after we ate dinner together in the cafeteria. Some part of me just felt like I’d be wasting my time if I just sat around all night in my dorm again, so we decided to just hang out together and get some food. Unfortunately, Izabel wasn’t there and had signed up to watch “Matilda” on Broadway beforehand. 

 Before actually going anywhere, we stopped by Rite-Aid so Alyanna could take out some money. In the meantime, Mark and I participated in a hardcore foam sword fight or two, danced to Prince’s 1999, and then proceeded to  both simultaneously. We hadn’t even gone a quarter of a mile from campus, and I was already having fun. 

En garde!
A while later, we left for Times Square and just kept walking around until we hit a Dunkin Donuts and Baskin Robbins hybrid store. I couldn’t decide between whether I wanted a donut or whether I wanted ice cream so I did a terrible thing and got both. Actually, I got a milkshake, and all together we got a half-dozen donuts. But still. The best part about it all was that when we ordered our half dozen donuts, the cashier asked me if he could give me extra. He actually asked me if he could give me extra, not if I wanted extra, but whether he had my permission to give me extra. Clearly, I couldn’t turn down such an offer.

He gave us seven extra donuts. Seven. Extra. Donuts.

We only paid for 6 and we got 13. If we think about this in terms of business that’s around a 117% increase in unanticipated deliciousness which translates to a whole lot more profat, I mean profit, on our part.

After a slightly delirious ride back, filled with sugar and an impending sense of doom (and regret), we found a comfortable place to lie down on the Low Library’s steps and looked up into the stars once more. It was amazing. And despite not seeing or tasting anything new, I had a lot of fun.

It just goes to show you, you don’t need very much to have a good time (but if there’s Prince and swords and free donuts and star-gazing then obviously it kicks things up a few notches).

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